September 2, 2009

Nasdaq Top Forming

I'm really seeing strong bearish signals forming on the Nasdaq. I was going to mention in the previous post that Shanghai has had some major trouble lately to. This is also a small part of why I'm looking to get bearish here.

This trade to go short is looking better and better as I look at this chart coupled with valuations. I mentioned before I wanted to see a spike day. I hadn't looked at the Nasdaq percentage loss yet or the chart. Well, there is a decent spike day. In other words a volatile day. It isn't all that nasty a day actually but if you look at some other things I am seeing there is not a good chart here.

My red support line shows an internal trend line that touches support 4 times. The buyers and sellers in the market are comfortable with moving prices higher on that trend line. The chart has rising lows. This is bullish. However, it is right on trend line support again here with an ugly shooting star/gravestone candle. It was also a volatile day on strong volume.

The resistance trend line shows us that the Naz has been making higher highs to. This was bullish too. But, on that last push the market got the breakout but failed to hold the higher high and continue. You can see it in the chart below. The last time the momentum stalled was about 1,850 and it brought the drop below trend line support. The only drop below it. This last move here is different because it actually made a higher high but buyers immediately got shaken out.

This is also a potential double top forming that the arrows point to. I feel like confirmation of the top will be right around 1,900. I plan on getting short before hand though. The fundamentals for a short look good to. I am thinking I want to get a little broad market exposure short with the bear 3 X short Technology ETF (TYP) or another market ETF. I want to enter on any weakness and any break of trend line support. I think the risk reward is good here even if this isn't a major top and we just get another day or two of pull-back. If I swing something the next support level is my profit target. Right above that red confirmation line on the second chart. If we get a big gap down I'll probably be even more bearish.

I think I might start doing video and audio charts sometime soon. Keep an eye out for those. And if you get my posts RSS be sure and subscribe to the comments to. I have the widget for that on the right sidebar. There have been some good comments lately. Especially on the Vonage VG post.

full disclosure:no positions at time of writing