Yesterday we spent time discussing potential intermediate-term moves and potential outcomes. Today, we increase the altitude to gain a much grander view and snapshot a weekly picture of the NDX. Before continuing we’ll reproduce the disclaimer on the Discovery Channel just before an antelope is attacked by a lion. “The following images my not be suitable for all ‘traders’. Discretion Advised.”
NDX Weekly
The NDX, as you have seen me banter over the last 3 months, is the weakest of all the sisters – nothing new in that statement. Consequently, this technical negativity has now transposed to the longer-term. As you can plainly see, the tech-laden index is forming a Stochastic & Volume Divergent Double top with a 2,200 neckline on the weekly graph. This does not bode well for US Equity Markets – here’s why.
If the NDX drops ~200 pt.s from the high (9.5% or so) and breaks the 2,200 neckline, the measured move would be another 10% dropping it back down to the October 2010 breakout and converging support around 2,000. This alone will begin to create a small amount of panic and exacerbate the other sisters’ technical weakness. Currently this is too early to foretell, but as we always say…. a good captain continuously views the horizon to foresee potential hurricanes.
I hope these missives help!
TAM-KAT