NAS/QQQ Weekend Look (Nov8-12)
Here is my weekend look at the NQ/QQQ going into Nov 8-12. The relentless move higher continued last week upto and following the FOMC. Going into last week my bearish harmonic target had been hit (See Oct 25 post) and I chose to remain patient until the FOMC reaction. The market has had a pattern of running up into the meeting and then selling off after the announcement. In this case it was a buy the news reaction instead. The successful taper was followed by positive labor data and excitement about the infrastructure bill. This all led to an stong close for the week. The NAS finished up over 3%.
From a technical perspective price opened the week at the 1.13 fib extension and the quickly blew through the 1.27 fib extension. As I stated last week a move through the 1.27 would negate the bearish harmonic. My methodology assumes continuation of the dominate trend when the a harmonic completion zone is breached. The thinking is simple. Harmonic completion zones are target areas where profit taking is expected. Profit taking often starts a reversal. Therefore, if a zone is ignored in can be assumed that traders have no interest in ending the trend. Buying or selling continues and traders playing for the reversal are stopped out adding to the momentum. Last week all the traders expecting a trend change were forced out of or reversed their positions.
Going forward last week's resistance zone is now support and the next areas of potential resistance are ascending trendline and the 1.68 fib extension above. The market feels extended, but the breath is increasing. This was most notable with the breakout of small caps. See my IWM post for reverence. The strengthen small caps tells us that the appetite for risk is still stung. Things are setting up for a rotation back into the beaten down growth small cap space as profits are taken from the megas which have been on an incredible tear.
Bear notes:
Potential reversal of the dropping 10 year yield
Sell the news reaction to the infrastructure bill
Market needs a new catalyst as earning wind down
Elon Musk tweet
Bull notes:
10 year yield dropping
Small caps breakout
Strong earnings growth.
November seasonally strong
Infrastructure bill passed.
No rate hike and slow taper.
Things to watch:
Many highly watched growth names reporting AMC, PLTR,PLUG,NIO,PYPL,TTD,SPCE ect
Tuesday... a lot of Fed heads speaking
Wed... Jobless claims & CPI
Fri... JOLTS and University of Mich. Sentiment
From a technical perspective price opened the week at the 1.13 fib extension and the quickly blew through the 1.27 fib extension. As I stated last week a move through the 1.27 would negate the bearish harmonic. My methodology assumes continuation of the dominate trend when the a harmonic completion zone is breached. The thinking is simple. Harmonic completion zones are target areas where profit taking is expected. Profit taking often starts a reversal. Therefore, if a zone is ignored in can be assumed that traders have no interest in ending the trend. Buying or selling continues and traders playing for the reversal are stopped out adding to the momentum. Last week all the traders expecting a trend change were forced out of or reversed their positions.
Going forward last week's resistance zone is now support and the next areas of potential resistance are ascending trendline and the 1.68 fib extension above. The market feels extended, but the breath is increasing. This was most notable with the breakout of small caps. See my IWM post for reverence. The strengthen small caps tells us that the appetite for risk is still stung. Things are setting up for a rotation back into the beaten down growth small cap space as profits are taken from the megas which have been on an incredible tear.
Bear notes:
Potential reversal of the dropping 10 year yield
Sell the news reaction to the infrastructure bill
Market needs a new catalyst as earning wind down
Elon Musk tweet
Bull notes:
10 year yield dropping
Small caps breakout
Strong earnings growth.
November seasonally strong
Infrastructure bill passed.
No rate hike and slow taper.
Things to watch:
Many highly watched growth names reporting AMC, PLTR,PLUG,NIO,PYPL,TTD,SPCE ect
Tuesday... a lot of Fed heads speaking
Wed... Jobless claims & CPI
Fri... JOLTS and University of Mich. Sentiment
Comment:
Got a minor break of support, but rebounding quickly. The red box should be resistance. If price pushes back through the bull party continues. Warning to shorts. In a market like this traders always buy the 1st dip so it not the best one to short unless you are a scalper. Wait for the retest and break lower if you are bearish.
Comment:
Price rejected off the resistance zone and then made a lower low. Now at the top potential first support. Watch for lower time frame reversal pattern before buying the dip. CPI was not good for tech and yields may spike again. Use TSLA as bellweather.
