Short-Term NASDAQ P&F Targets 4-11% Down
The above chart is a summary of my short-term P&F targets for $NQ. These targets are actually clusters of targets taken from recent distributional patterns that are visible on the 5 minute P&F chart, shown below (click to expand):
The Point & Figure chart spans just over a week, from May 15th. Being volatility adjusted, a P&F chart captures trading range structures better than regular bar charts. We can also use them to forecast possible price targets. A P&F target is where price could go before pausing in another trading range, based on the Wyckoff principle of effort and result.
You can see that on the P&F chart, I have drawn four trading ranges bounded by blue lines. From left to right, we see two re-distributional structures, one small accumulation, and the most recent prospective distribution. I'm calling this prospective because there's still a chance that the current decline could become a spring within an accumulation. We need to bear this in mind and keep our options open, but given the bearish background and what I'm seeing so far, I'd put it 70/30 in favor of distribution.
Using the Wyckoff P&F counting technique, I have projected several price targets from each structure. There are conservative targets and more aggressive targets for each (follow the arrows down from the count lines to the shaded target areas). As shown by the blue balloons, the most conservative targets for the first two distributions each projected the price level for the subsequent trading range pretty well.
It is good to keep a note of the more aggressive targets as these can be hit later on. The chart sows that multiple targets have clustered around two price areas, 10,950-11,310, and 10,455-10,770. These confirmatory counts give increased credibility to the target clusters.
Assuming the most recent trading range is distribution, then the most conservative count targets 11,670. Commonly, in a distribution, this is where we can get a Major Sign of Weakness (MSOW) - an intermediate reaction before price collapses faster (Wyckoff Phase E). We could get a MSOW at 11,670. Or, a new trading range could form and may even be an accumulation. We will just need to read the chart as price unfolds. However, given the bearish background and lower P&F target zones that are yet to be reached, I'm betting on more weakness ahead and am short the NASDAQ via puts on QQQ.
I'll add more analysis as the story unfolds - please remember to like and subscribe!
Good luck out there!
The Point & Figure chart spans just over a week, from May 15th. Being volatility adjusted, a P&F chart captures trading range structures better than regular bar charts. We can also use them to forecast possible price targets. A P&F target is where price could go before pausing in another trading range, based on the Wyckoff principle of effort and result.
You can see that on the P&F chart, I have drawn four trading ranges bounded by blue lines. From left to right, we see two re-distributional structures, one small accumulation, and the most recent prospective distribution. I'm calling this prospective because there's still a chance that the current decline could become a spring within an accumulation. We need to bear this in mind and keep our options open, but given the bearish background and what I'm seeing so far, I'd put it 70/30 in favor of distribution.
Using the Wyckoff P&F counting technique, I have projected several price targets from each structure. There are conservative targets and more aggressive targets for each (follow the arrows down from the count lines to the shaded target areas). As shown by the blue balloons, the most conservative targets for the first two distributions each projected the price level for the subsequent trading range pretty well.
It is good to keep a note of the more aggressive targets as these can be hit later on. The chart sows that multiple targets have clustered around two price areas, 10,950-11,310, and 10,455-10,770. These confirmatory counts give increased credibility to the target clusters.
Assuming the most recent trading range is distribution, then the most conservative count targets 11,670. Commonly, in a distribution, this is where we can get a Major Sign of Weakness (MSOW) - an intermediate reaction before price collapses faster (Wyckoff Phase E). We could get a MSOW at 11,670. Or, a new trading range could form and may even be an accumulation. We will just need to read the chart as price unfolds. However, given the bearish background and lower P&F target zones that are yet to be reached, I'm betting on more weakness ahead and am short the NASDAQ via puts on QQQ.
I'll add more analysis as the story unfolds - please remember to like and subscribe!
Good luck out there!
Comment:
I've added an extended target on the recent prospective distribution of 10,500 to 10,680. This is right in the middle of Target Cluster #2. For more details, see:
Comment:
We're getting a "rally into the ice". Distribution thesis still holding strong if price stays below 11,900. Much above that, we'd need to consider whether this is a possibly an accumulation. I would definitely want to see price make a lower high vs. yesterday's close, but technically it could still upthrust the high like it did on the prior accumulation. That would create a larger count to the downside.
Comment:
MSOW target has been hit, but I don't see price stopping here, given the momentum. Prior low and target Cluster #1 now in play.
Comment:
The NQ did create a MSOW at that conservative target after all, and the rally looked somewhat bullish, didn't it? But, it didn't have the backing of an oversized options expiry like the rally on Friday. Instead, it created a local upthrust. If the local TR is a re-distribution as a MSOW, as I suspect, then its tentative P&F count currently takes price back to last week's low. We'll then need to evaluate any local TR that develops, bearing in mind that there are still lower targets to hit.
Comment:
* Closing comment for Tuesday May 24th *
Today, the NQ created what I expect to be a MSOW after hitting the conservative P&F count from the prior distribution. The price was unable to penetrate much into the prior SOW and shows deteriorating demand. Nasdaq breadth for today (as measured by the bullish percent index) went down over the day, despite the attempted rally. Given all these factors, I'm expecting the day's mini trading range to be distribution. However, *it is not complete*, so this is a provisional consideration. I have created a *provisional* count in the chart below:
The count goes to 11,153-11,235 which is nicely within my target Cluster #1. Perhaps tomorrow will be the day that price drops into this cluster. We will need to watch and review.
Today, the NQ created what I expect to be a MSOW after hitting the conservative P&F count from the prior distribution. The price was unable to penetrate much into the prior SOW and shows deteriorating demand. Nasdaq breadth for today (as measured by the bullish percent index) went down over the day, despite the attempted rally. Given all these factors, I'm expecting the day's mini trading range to be distribution. However, *it is not complete*, so this is a provisional consideration. I have created a *provisional* count in the chart below:
The count goes to 11,153-11,235 which is nicely within my target Cluster #1. Perhaps tomorrow will be the day that price drops into this cluster. We will need to watch and review.
Comment:
The overnight action has me thinking that the most recent intra-day TR is a possible accumulation. I have updated the chart with two accumulation targets, shown by the green shaded boxes. The most conservative is 11,985 to 12,060. The second is 12,420-12,345. I've left the distribution targets on the chart for now.
On recent distributions, price has been hitting the conservative targets. Perhaps this will happen with the prospective accumulation. If so, the advance should stop close to the most recent highs and possibly make a lower high. But, a larger advance would not be surprising. First they shake out the bulls, then they shake out the bears! The overall trend is still down, at least for now.
On recent distributions, price has been hitting the conservative targets. Perhaps this will happen with the prospective accumulation. If so, the advance should stop close to the most recent highs and possibly make a lower high. But, a larger advance would not be surprising. First they shake out the bulls, then they shake out the bears! The overall trend is still down, at least for now.
Comment:
Tricky day, today. All day, I've been considering whether the current intra-day trading range is accumulation or distribution.
I'm still not sure. We had a breakout, but that is currently being quickly reversed. Was that an "Upthrust After Distribution" (UTAD)? A quick reversal is what we'd expect, if so. But, there has been good volume to the upside. On the other hand, where has that got us? The most conservative accumulation count has been met. That may just represent the accumulation segment within this trading range, which may turn out to be distribution. There is no choice but to continue to watch and wait.
I'm still not sure. We had a breakout, but that is currently being quickly reversed. Was that an "Upthrust After Distribution" (UTAD)? A quick reversal is what we'd expect, if so. But, there has been good volume to the upside. On the other hand, where has that got us? The most conservative accumulation count has been met. That may just represent the accumulation segment within this trading range, which may turn out to be distribution. There is no choice but to continue to watch and wait.
Comment:
The last trading range was indeed accumulation and it triggered a short-covering rally to boot. I'm now looking at this whole apex formation (yellow lines) as a potential accumulation structure. That will provide a large cause for a move up, so it looks like we may have hit at least an intermediate market bottom. I will provide analysis of the next moves in future posts.
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