QQQ Daily, 05/06/2014: Chapman falling axe pattern

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I said yesterday that if the Q's couldn't push above the upper resistance line then there is something very wrong. I was 100% certain that the Q's would push up and out of the channel and maybe even rise above the important swing high at $88.21. Hey, not so fast.

calmthewaves commented that he saw the Q's in a falling broadening pattern and when I looked I saw it too but I still thought the Q's would break out. They didn't and there is something wrong.

Basil Chapman, one of the best technicians out there, calls this pattern a falling axe pattern and it is not bullish . Because the Q's have tagged that bottom line four times over the past few weeks, I am now thinking that the Q's may be on their way to that lower line again, and that's not good. However, if the Q's find support above 85.11 then I'll still hold that the Q's will break up and out of this pattern and then we're off to the races. So 85.11 is key. We drop below 85.11 and then I would expect the lower support levels of 83.74 and 83.28 to be on the agenda.

I am long TQQQ             but haven't added my last 1/3rd position and, most important, I have my stop in place.

PS- SPX and SPY blew all three daily trend algos too
CurtisM stockSMASH
biff, I have to take it one day at a time but as you know my monthly chart has been showing a loss of momo almost since the first of the year. IWM is in trouble because it has something like 25% weighting of financials and they are getting whacked.

My gut tells me we are tells me we are headed down but the charts of $SPX are not confirming and I have to go with the charts. What will finally convince me that we are truly headed deep south will be a sell signal in the weekly charts. That might happen on IWM this week but then there's all this hype over alibaba that might save the markets. Key today will be whether or not indexes can hang on to and then build on the green in the futures right now at 8:30am. If they can then I wouldn't be surprised to see a test of the highs in a few days. If they can't and end red, then downside argument gets stronger, IMHO
SimGlenn CurtisM
Curtis - action like today's continues to build the case that this market is in a major topping process. An 86 basis point divergence between COMP and SPX today, on top of significant divergence this year is yet another very serious signal. I will be reducing my overall equity position from 80% to about 40-50% over the next few months unless I see this trend reverse. I never go under 40%, so for me that is essentially being out of the market. I've got my first 10% trades identified already.
why is it that whenever my lines say down, and I try to 'splain'...everybody thinks I am dead wrong and the bad boy... not you Curt, but everybody else and their mother in law. Get real people... RUT blew it's 200 day and my algo lines. 250 is next and maybe more. Expect spx to test low 1800s. We doji wicked nice over my algos on dow, and got blasted down. Week aint over. market pulled a sweet reverse. more pain in the vein for longs. My beloved tna, rest in peace. that said, somewhere down there may be a bounce point to take this market to 1900 or more. transports got wacked. 2 of three algos blown. Dow blew all it's daily chart trend algos as did XLI and XLF. XRT too. QQQ did not. But it is not looking good. Tomorrow is set for more down.... always a down day follows these algo blows.
This is a market that has actually held up very well. Aside from giving it up today, this market has not wanted to go down over the last couple weeks. That is bullish. I need to see RUT and COMP outperform DJIA and SPX or I'm afraid a top may be forming over the next 4-6 months. That flight for safety from the fund mgrs cannot be ignored. I will probably cut my equity exposure by 10% each month if this pattern continues. Really looking like a tired 5 year old cyclical bull market. Bull or bear secular market most likely requires a 25% drop for the next set-up or transition.
CurtisM SimGlenn
Glenn, like you, and probably millions of others, I need to see $RUT and $COMPQ and $NDX regain their leadership roles. $SOX and $TRAN are holding up well here so as long as they don't cave then there's the chance that $RUT, etc will recover and start to move higher. However, and as you know, the monthly chart of $SPX is showing momentum loss and while this hasn't led to much as of yet it has the potential of leading to a major decline. But the month is young so plenty of time for $SPX to regain 16pts and push higher.

In the near term, I think it's absolutely imperative for the Q's to stay away from 85.11 as a close below that level, especially with volume, probably means Q's drop into the 83's and perhaps lower so, for me at least, QQQ 85.11 is key.

I agree. Something is wrong here...there were a few too many negative indicators so I locked it my profits back when it was a pennies over 90.

Thanks for bringing this to my attention..this and the $SPX + $DJIA performance after hitting that high in the first week of April has me trimming most of my equity positions for the next few weeks at least. If we start rip-roaring again I'll take another taste but idk if I share your optimism of QQQ bouncing off that lower line. Nice analysis :-)
CurtisM androsForm
andros, good for you taking some $$ off the table when the Q's hit that high back in March. Since March of 2009, the Q's have been leading this market around by the nose and it's important that they reassert themselves as the leader, once again. Until this happens any rally, be it over 2-3 days or 2-3 weeks, is suspect. I don't normally bother with stops because every dip until recently has been a buying op, but I have my stop set on TQQQ and I'm not pulling it or moving it.

Thanks for your comment and GL
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