NDX / QQQ May Fail at Resistance

NDX and QQQ have rallied right up to critical resistance. The blue downtrend line has been an area where price failed at resistance multiple times since March 2022.

Today, price rallied right up to this downtrend line resistance and turned lower. But the pullback has been shallow into the end of day. Tomorrow, price could rally again for one more retest of this line, which would be about 294 on QQQ. Price does not have to retest this line, but it can, and retests can often occur to trap those jumping on a trade at the first sign of reversal.

An equivalent downtrend line on NDX is posted below for those more familiar with NDX levels rather than QQQ levels. If price retests the downtrend line tomorrow on NDX, the level of resistance at the downtrend line will be approximately 12,037.

Momentum has not yet turned bearish on the 130m and 195m intraday charts. The chart above uses the 130m time frame. However, momentum appears to have turned bearish on shorter time frames such as the 30m chart.

Shorter intraday time frames such as the 30m chart with bearish momentum can signal either a brief pullback to support before the rally continues, a mere whipsaw in price (more chop, designed to chop up eager traders like us), or a more serious reversal that will lead to the resumption of the severe downtrend.

Given that price is right at resistance at the downtrend line above, it makes sense to favor a more serious reversal. While challenging to predict timing and direction, it works better to watch these key levels and how price responds to them rather than rigidly trying to predict / forecast what happens this week. It also helps to be prepared for a whipsaw (false breakout) to the upside to near 300 to trap the bulls before the decline resumes.

The key Fibonacci level of 286.82 should also be watched as price has risen above this major resistance level, which now acts as support. This equals the .50 retracement of the entire rally from Covid-crash lows in March 2020 to November 2021 highs.

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Similar downtrend line on SPX appears in black below. SPX has been weaker on this latest bounce than NDX. NDX has retraced nearly 61.8% of its steep June 2022 decline while SPX retraced only slightly more than 50% of its June 2022 decline. It will be interesting to watch whether continues to outperform SPX on any subsequent decline—this means that if indices sell off again, it may be helpful to watch whether NDX declines *less* than SPX does.

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Key spots to watch on SPX. NDX has already broken it's short-term uptrend line for this recent rally off June 16 lows. SPX looks to be breaking it soon . . .

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NDX / QQQ daily chart shows a really strong rejection at the blue down trendline discussed yesterday. If NDX closes below its 8-day EMA or lower, this strengthens the case for continuation of the downtrend.

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And this morning, QQQ rose to re-test that trendline just one more time this morning--ensuring that early bears (yesterday or two days ago) were shaken out, and trapping eager bulls, who expected a break to the upside on the retest and jumped in and got trapped. This market has been tough for sure.

Comment:

Some have asked about the next major level of support. Short answer: about $258-261.
A couple Fibonacci levels line up there.
258 = .618 retracement level of the entire bull rally from Covid lows to 2021 peaks. 261.85 = 1.272 extension based on the retracements of the recent rally from June 17 - today. 257 = another key Fib level.

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And QQQ 269 should also be watched as that is the major support at June 17 low.

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UPDATE: Because some have asked, I am watching NDX / QQQ today closely. So far, it has been weaker than the other indices (SPX, DJIA, and RUT -- Russell 2000). I am carefully watching the high on NDX / QQQ from yesterday = 284. I suspect QQQ's price will not *close* above 284, though we all know *anything* can happen, so manage your risk appropriately if trading, ok friends?

From an EW perspective, a strong close / break above yesterday's high may mean another retest of the downtrend line on the original chart at the top of this idea page. Watch the same pattern on the other indices if you can. So far, indices seem to be stalling out near the highs from yesterday, June 30.

Thank you everyone who has commented, liked or followed this idea! I appreciate the support as I work towards mastering the markets with all of you.

Comment:

SPX and RUT both broke above yesterday's high. So this little corrective bounce may have further to go. NDX / QQQ has not yet broken above yesterday's high.

Using Fibonacci relationships along with Elliott Wave, SPX 3832 - 3850 is a good spot for SPX to find resistance. Of course, the black downtrend line on SPX referenced above would also be strong resistance, but that is much higher. If this is a corrective A-B-C type bounce, then I'm watching SPX 3832-3850 as a spot for SPX to stall.

On QQQ, I'm watching yesterday's high first. If that is surpassed, then I'm watching 285-286, where the two legs of the bounce off June 30 lows would be approximately equal.

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Please check out my updated view on NDX / QQQ:

04:16