The Chart du Jour
On February 27th of last year, we put out a singularly bearish subscriber-only article entitled "Nasdaq Crash: First Stopping Point." We were slightly premature in our forecast back then for when and where the Nasdaq rally would top out. But ultimately, after a brief two-week price spike beyond our target sell zone, our bearish forecast panned out almost perfectly.
Now once again, we have been early in forecasting a low. The market has spiked through our 1680-1735 Nasdaq 100 target buy zone, and caught our stop at 1645. Out of sheer discipline and respect for a stop level being elected, we must consider ourselves flat, and down a bit of money on this last trade. We apologize for our impetuousness. We also wish to congratulate others such as Bob Prechter's group for more correctly forecasting the ongoing magnitude of the recent decline.
Fibonacci targets can sometimes work perfectly, but at other times get temporarily overshot by excessive market volatility. More seldom, levels that should have been important just completely give way.
In the current instance, and looking at the Nasdaq Composite chart above, we continue to believe that a bottom is in the making. Thursday's price action came very close to an outside-day-up "key reversal," and the overall Fib rhythm of this chart still looks nice and tight -- and complete. A bounce toward the 100-day moving average near 2570 and maybe all the way back to the 200-day moving average near 3070 are technically likely with time. But where's the fundamental catalyst?
Of some importance, we lack one. Even more importantly, multiple trap doors to the market exist. Are the public bailing out of the go-go Janus funds yet? No, although someday they most assuredly will. Hoof and Mouth and Mad Cow diseases are also likely coming to the U.S., and contrary to USDA assertions, there is a strong chance that the U.S. food chain is already infected. One public news event on this latter topic could serve to truly unnerve the market as it did Ireland's capital markets Thursday.
In short, the general volatility of this market has us scared. As such, we will no longer try to aggressively capture our expected rally. At this point we simply want to stay out of this market's way both up and down, with a primary goal of preserving capital. We also hope to stay psychologically on-sides and ready to resell this market at a later date and hopefully at a significantly higher level. Until then, no one says you have to play at all. Chilling out is an acceptable position too.
Subscribers are invited to click here for immediate access to our latest in-depth article: "Measuring Financial Time: The Magic of Pi." The article is 10 pages in length, and in it, we touch upon two centuries of financial history. We also leave readers with our cyclical vision for the next decade, as well as a shorter term perspective of the NASDAQ 100 index for the balance of the year.
Non-subscribers are invited to sign up for a quarterly subscription below.
It also may be of interest to some as well that because so much time (and thus timeliness) has now transpired, we recently released three of our 2000 subscriber-only articles. These now appear under the public Earlier Articles section of the website. Perusing through them may give one a sense of the added premium level of analysis we provide to subscribers.
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