Courtesy of Allan of Allan Trends
Weekend Market Analysis
My prior life was that of an attorney and early in my legal career I learned that basic elements that apply to just about any legal case:
From this basic outline flows the judicial framework that makes us a nation ruled by law and not anarchy. [Theoretically…]
I shall now make the case for an imminent decline in Nasdaq and the for the chosen vehicle to exploit such a decline.
[click on charts to enlarge]
What is the Intermediate trend of Nasdaq?
An object in motion tends to remain in motion until acted upon by an external force. Newton, Isaac, Philosophiæ Naturalis Principia Mathematica, 1687.
(a) The Nasdaq Daily Trend Model reversed SHORT this past week. As seen on the chart above, the Nasdaq has been true to its trend model for almost a year.
(b) We can now count a completed 5 waves UP from the rally that began last November. Although Elliott Waves are weighted less than our Daily Trend Models, we cannot ignore such a picture perfect five waves UP. After all, Elliott Wave analysis is trend analysis when you strip it of all of those pesky numbers and letters. A trend is a trend, no matter how you determine it.
(c) The Nasdaq has been moving within its trend regression channels for the past year, using the breaks of the channels to signal new directional trends. Price is sitting right on its lower trend channel this weekend and it will take but one close lower to break the channel to the downside.
JUDGMENT OF THE COURT
The aforementioned facts and arguments make a compelling case that the Nasdaq Intermediate Term Trend is in the early stages of turning down.
Although it will take a break of the trend regression channel that rises up from the lows of June to confirm the reversal down, it is the Nasdaq Daily Trend Model that has dominated intermediate direction since the Fall of 2011. That is, by rule of law (here at AllanTrends), determinative of the direction of trends.
The Elliott Wave count and imminent break of the regression trend channel are supportive of the Daily Trend Model, but as this Court has ruled before, such ancillary considerations must always defer to the precedent set by the Daily Trend Models.
Action to be Taken
We have many tools at our disposal to enforce the judgment of the court. Below is by decree the means for implementation of the Order of the Court.
- QID Daily Trend Model
We see imposed on the chart of QID the elements set out above that have made such a compelling case that Nasdaq has turned down. QID, being the inverse of Nasdaq, sports the same patterns, trends and wave counts, in reverse, as the three Nasdaq charts above. QID was trading in the mid-40′s at the beginning Nasdaq’s intermediate trend up from November of last year.
It is the judgment of this Court that the rally up from November is likely to be retraced by at least half, if not in its entirely, resulting in gains of between 50% and 100% in QID in the weeks and months ahead. Therefore, a Long position in QID is warranted.
SO ORDERED, this 29th day of September, 2012.
The Weekend Update is Adjourned.
Weekly Trend Models
Allan Trends provides trading ideas based on Technical Analysis and signals that follow the trends. Allan covers about 30 stocks, indexes and ETF’s, including Hourly Models in SPX and QQQQ for shorter-term analysis. Most trades last for weeks to months. Learn more here.
Educational articles from Elliott Wave International