In looking at the lines I've drawn on QQQ the last year or so, what stands out is that when QQQ breaks decisively below uptrend support lines, it has always been eventually fatal. (I feel like a moron for not believing my own TA on May 3 and 6 when I should have opened a massive short with tight stops. I agonized over the charts on those days, but the bulls had really worn me down emotionally and I didn't take the trade.) If it regains uptrend support rather quickly after fakeout below, it can continue uptrend for some time, but eventually loses it again.
I was 100% wrong about the strength and length of the post-December rally. That bounce went way higher than I expected. So take what I say with a grain of salt.
However, it really does feel like we're at the end of the cycle because of so many different things: we've got weak international economies and trade wars to goose us to the downside on top of our cyclical and monetary expected downturn. If you look at my past index ideas (QQQ, SPY, etc), you can see some more of that indepth research on the macro fundamentals subject.
Back to the chart, I see some very strong repeating patterns from the Oct-Dec correction. If you allow your eyes to simply wander over the peaks and valleys (including some lines that are obvious but which I've not drawn as they would make the chart too busy; ETA: ok, I relented and added purple downtrend to Oct-Dec), you can quickly start to see various likely scenarios emerge.
I'm looking for a bounce off my red line today and hopefully bouncing to $180 for gap fill at purple by Monday or Tuesday. I hope to add big size to my SQQQ position at purple and get a strong rejection off of purple for the next phase of down.
If QQQ breaks above downtrend purple, it is reason to closely watch, but not reason to exit short. This is where those imaginary lines in October (ETA: now added) come into play. Notice how much steeper my May purple downtrend is than the eventual more authoritative lime-green downtrend in Oct-Jan. If you look at October and had drawn a purple-style downtrend in Oct, it was also much steeper down and also had many more "fakeouts" above than the eventual shallower lime line. However, the market kept coming back to that steep downtrend until its eventual bottom and V bounce late Dec. I wrote all of the above (with the exception of the ETAs) and then realized that it was stupid to talk so much about the imaginary line without actually putting it on the chart. So just now I've added a purple steep down-trend line to the chart in Oct-Dec and I'm amazed at how that was eventually support for the V bottom. Very elegant and orderly.
I'm looking to the current steep purple downtrend to possibly provide future direction, though I also expect it to be unsustainably steep and that we'll see some action above it in the coming downcycle.
The markets' clear double-top mean that this could be our big 2000/2008-style correction. Please notice that both 2000 and 2008 had very similar double-top formations, though 2000 and 2008, the second top was slightly lower than the previous and in our case it's slightly higher. From a TA perspective, that's far less bearish than an equal double top or a lower high double top, but from my experience in crypto-trading where there is obvious whale manipulation, I've become very cynical and believe the legacy markets are manipulated just as much by the big boys, they're just more practiced and subtle about it. Pure TA would lead us to guess at a higher low than Dec. and a march back up for another higher high, but because of macro winds, I'm skeptical of that scenario. However, I've also painfully learned from the Dec-May bounce the truth of the maxim that the market can remain irrational longer than you can remain solvent. Stops must be honored, setups must have invalidation.
After writing that last sentence, I determined that $187-$191 (reclaiming the previous two ATHs) are clear red lines of invalidation, but also painfully distant from our current price, especially at 3x leverage of SQQQ. So I went ahead and cloned the Oct-Feb lime-green line to provide a second, closer point of invalidation whose violation will trigger a position size decrease and de-risking.
Best of luck and I look forward to hearing your thoughts as well!
I was 100% wrong about the strength and length of the post-December rally. That bounce went way higher than I expected. So take what I say with a grain of salt.
However, it really does feel like we're at the end of the cycle because of so many different things: we've got weak international economies and trade wars to goose us to the downside on top of our cyclical and monetary expected downturn. If you look at my past index ideas (QQQ, SPY, etc), you can see some more of that indepth research on the macro fundamentals subject.
Back to the chart, I see some very strong repeating patterns from the Oct-Dec correction. If you allow your eyes to simply wander over the peaks and valleys (including some lines that are obvious but which I've not drawn as they would make the chart too busy; ETA: ok, I relented and added purple downtrend to Oct-Dec), you can quickly start to see various likely scenarios emerge.
I'm looking for a bounce off my red line today and hopefully bouncing to $180 for gap fill at purple by Monday or Tuesday. I hope to add big size to my SQQQ position at purple and get a strong rejection off of purple for the next phase of down.
If QQQ breaks above downtrend purple, it is reason to closely watch, but not reason to exit short. This is where those imaginary lines in October (ETA: now added) come into play. Notice how much steeper my May purple downtrend is than the eventual more authoritative lime-green downtrend in Oct-Jan. If you look at October and had drawn a purple-style downtrend in Oct, it was also much steeper down and also had many more "fakeouts" above than the eventual shallower lime line. However, the market kept coming back to that steep downtrend until its eventual bottom and V bounce late Dec. I wrote all of the above (with the exception of the ETAs) and then realized that it was stupid to talk so much about the imaginary line without actually putting it on the chart. So just now I've added a purple steep down-trend line to the chart in Oct-Dec and I'm amazed at how that was eventually support for the V bottom. Very elegant and orderly.
I'm looking to the current steep purple downtrend to possibly provide future direction, though I also expect it to be unsustainably steep and that we'll see some action above it in the coming downcycle.
The markets' clear double-top mean that this could be our big 2000/2008-style correction. Please notice that both 2000 and 2008 had very similar double-top formations, though 2000 and 2008, the second top was slightly lower than the previous and in our case it's slightly higher. From a TA perspective, that's far less bearish than an equal double top or a lower high double top, but from my experience in crypto-trading where there is obvious whale manipulation, I've become very cynical and believe the legacy markets are manipulated just as much by the big boys, they're just more practiced and subtle about it. Pure TA would lead us to guess at a higher low than Dec. and a march back up for another higher high, but because of macro winds, I'm skeptical of that scenario. However, I've also painfully learned from the Dec-May bounce the truth of the maxim that the market can remain irrational longer than you can remain solvent. Stops must be honored, setups must have invalidation.
After writing that last sentence, I determined that $187-$191 (reclaiming the previous two ATHs) are clear red lines of invalidation, but also painfully distant from our current price, especially at 3x leverage of SQQQ. So I went ahead and cloned the Oct-Feb lime-green line to provide a second, closer point of invalidation whose violation will trigger a position size decrease and de-risking.
Best of luck and I look forward to hearing your thoughts as well!
Comment:
I changed my strategy a bit and closed SQQQ above purple and then reopened at green. Fortunately I had some fat profits from initial dip to pad the pain. I have stops set for any break higher in QQQ, but am hoping green is short-term top area.