September 4th – Market Drops
Our Markets have been extending, and they were due for a dip into a dcl . I’ve actually been saying that they are overdue, but look to be enjoying a runaway move. Runaway moves eventually become unsustainable and here we are–we had a sharp flush down day.
– IS THIS THE TOP?
– DO WE GO STRAIGHT DOWN FROM HERE?
– CAN THIS BOUNCE AGAIN? Well, it is Friday (And Markets are closed Monday in the US), so lets just…
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1. Take a look at what happened.
2. Discuss a few different possibilities.
3. Decide if you want to be positions long – short -or more Cash for the weekend.
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SPX – Since we are very late for a dcl, this drop may only do a 1 or 2 day drop and then put in a swing. Look at the circles, we have seen that action before.
THIS is why it is hard to go heavily short at the top of a Bull Market, but having a short as a hedge right now is not a bad idea. You can always add to that position or close it , depending on what we see going forward. Let’s discuss the drop further…
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NASDAQ (QQQ) So far this chart shows me that most large drops only lasted a day or 2 and tagged the blue 20sma, and the Red 34 sma was tagged twice. This is where I look as the next step. IF THIS BREAKS DOWN FURTHER, WE ARE SEEING SOMETHING NEW.
NASDAQ (QQQ) – So I see Large Volume 1 day drops here, and then the dip was done. Buyers stepped in and day 2 became a reversal. Will that happen Friday? We’ll see. So with this, we could still get a dcl here, a weak run higher that rolls over into the ICL. The time is actually right for that, I will show that soon.
NASDAQ ( QQQ) – I am now showing years of the QQQ just crashing for 1 or 2 high volume days, and that was it. Again, this makes it very hard to time the short trade. A dcl followed by a weak bounce will be where I go short into an ICL.
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Now I want to look at the Tech Bubble of the NASDAQ in the year 2000.
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NAZ TECH BUBBLE: We see a double top. The first drop is down into a dcl, and this is similar to what I think we could see with current markets. Then we get a Daily Cycle Low, followed by a rally that rolls over as a lower high and down into an ICL.
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An ICL is almost always in the form of an A-B-C drop. That comes from 2 daily cycles. You may see 1-2-3-4-5, but an a-b-c can be drawn up in that 5 wave formation too.
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NASDAQ (QQQ) – I have drawn here my idea of a possible a-b-c down with
1. A drop into a dcl,
2. A rally in the final daily cycle, and
3. The drop to the ICL.
NASDAQ ( QQQ) – In 2018 we had an ICL in February (and this year of 2020 was March). So I just wanted to look at the ICL to ICL timing and this one was stretched Feb to Dec. Many are 6-7 months. Notice that this Double top PEAKED in September and dropped for the rest of the year. We could see that, and MINERS could run as these markets drop. THAT WOULD BE GREAT, because Big Money might then seek safe haven in Miners.
So we need to see what happens Friday to know if this is a 1-2 day drop or is it something different this time? With those moving averages support price like they have all along? Or again, is this something different here?
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What is another reason that I think we may do a quick 1-2 day drop to a dcl and not a crash? AIRLINES, CRUISES , and other so called weaker sectors actually closed green. That just seems odd if we are in crash mode, doesn’t it?
Carnival Corp
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JetBlue ( See also AAL, DAL, UAL, JETS).
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Royal Cruise
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GOLD – Gold is on day 16 with a day 4 peak. The MACD has curled down and this looks (so far) like it will be a L.T. Daily cycle. THAT can lead to a drop into the ICL or the next daily cycle may lead to the ICL. So far we have Choppy sideways movement. I say that it looks like that ‘so far’ because …
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I say that it looks left translated ‘so far’ because this also looks like a Bullish Triangle. If this breaks out and the Markets continued lower? That would be Bullish for Gold & this could make a run, but this is LEAST LIKELY in my opinion. The USD wants to rise & Markets need a DCL.
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Please excuse the rookie repair job on my GDX chart. Somehow the upper corner of this chart got wiped out and I had to hand repair it. 🙂
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GDX – This is VERY encouraging for our expectations after we get an an ICL. Why?
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I’ve been expecting a market top & Sell off, and there was always that concern that Miners would get caught up in the selling. On day 17, it would have been perfectly acceptable for GDX & GDXJ to start to join the Thursday market crash, but Miners dipped and bounced back. THAT is a good sign.
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Review: So we need to see what happens Friday to know if this Market Drop is a 1-2 day drop or is it something a bit different this time? With those moving averages support price like they have all along? Or again, is this something different here?
Today is Friday (And Markets are closed Monday in the US), so lets just…
1. Take a look at what happens Friday,
2. Remember the few different possibilities presented here,
3. And decide if you want to be positions long – short -or holding more Cash for the weekend.
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Enjoy your Friday Market Action!
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~ALEX
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EVFM held up well, so I didn’t sell my position. It had stronger volume and I actually think that it would have broken out if the markets didn’t crash.
LCA – was down in the morning & I took a position. The markets then started to sell off quickly, but LCA held up above the 8 ema and eventually closed green. This moves FAST, it is not for the feint of heart 🙂
LCA is very similar to these rockets, and this is why I held on. SHLL, GRAF, FMCI, NIO and several others fell to the 8 ema & Bounced, so I’m hopeful that LCA, SPAQ & WKHS can hold up too. So far they did…
I’m hopeful that SPAQ & WKHS can hold up too.If the markets bounce soon, I think they’ll move higher, but if it sells off further we could see a shake out or break down.
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SPAQ dropped to the 50sma and bounced, closing down 6%. So far this is ‘technically’ ok, but we don’t want to see follow through down, because these can move swiftly.
WKHS – Dropped 7%, but is also still technically fine after such a large drop in the Markets.
