On this update I want to cover the broader market Indexes.

Nasdaq 100 Index -$NDX - 60 Minute Chart - Diamond Continuation Breakout Pattern
The 60 minute chart of the $NDX illustrates that it has broken out of a Diamond Continuation Pattern. This breakout cancels out the head and shoulders top scenario that we had been discussing last week. Just because something looks like a head and shoulders top doesn't mean that it is. It has to violate trend lines to confirm the Head and Shoulders pattern. All patterns need confirmation. The $NDX never violated the uptrend line at 1780. Therefore, it is a failed head and shoulders top. This means that we have to give the bullish trend the benefit of the doubt. Furthermore, you can see that the $NDX rallied sharply upwards from the lows and subsequently broke out of the diamond. The indicators and oscillators are in a 123 bullish trend reversal, the highs in the PPO and WM% coincide with the highs in price. The stochastics are bull flagging.

Nasdaq 100 Index -$NDX - Daily Chart - Diamond Continuation Pattern within Continuation Slim Jim/ Rectangle
The $NDX on the daily illustrates that it has just broken out of a Diamond Continuation Pattern, but continues to trade within the Continuation Slim Jim/ Rectangle. The pattern is never what people think it is. It is a slippery pattern. The fact that it was able to breakout of the diamond is bullish. The breakout indicates that the head and shoulders pattern is a failed pattern. What I want to emphasize here is the fact that sometimes it is more profitable to play the emotional reactions that come in when a bearish pattern fails. That is why I issued 5 buy alerts at E. The indicators and oscillators are in a 123 bullish trend reversal, and V shape the stochastics indicate that the trend is strong. The WM% is still trending and trading in a above 20. The PPO has bottomed and is curving upwards. This is bullish. What should we do with the information that we have? The only thing we could do was buy. We keep going long until going long stops working. That is why we trade the trend. You do not short in advance, you only short on confirmation of the broken bullish trend.

Nasdaq 100 Index -$NDX - Daily Chart - Ascending Triangle Breakout Pattern
Sometimes when analyzing charts in different time frames it is difficult to discern what is rally going on. As I always say, technical analysis is subjective. When the picture is difficult to discern, you have to follow the chart that has the most reliable pattern and trend. Typically, the chart monthly or weekly charts will give a clearer and more reliable picture of the pattern and trend in technical analysis. A good rule of thumb is to follow the chart that gives you the clearest analysis. In this case, the weekly chart of the $NDX confirms the bullish trends on both the daily and the weekly charts. Looking at the weekly chart, you can see that the $NDX has broken out of a bullish ascending triangle pattern. Furthermore, the EMA's have had a triple moving average crossover and are now trading in a bullish fan. All of the indicators and oscillators are in 123 bullish trend reversal and are moving up along with price. The weekly chart confirms the bullishness in the daily and 60 minute charts. This is all non subjective.

NASDAQ 100 Shares (QQQQ) - Daily chart- Bullish Continuation Rectangle Pattern or Possible Head and Shoulders Top
The QQQQ's have been range bound in the rectangle since November. This tight range is very frustrating and psychologically draining just because it won't move out of this range. Direction would be nice! In addition, the Q's may be forming a possible Head and shoulders top or Reverse symmetrical triangle. However, it is holding the uptrend line, so until it takes that out, the trend is still bullish and the bias is upwards. Furthermore, there is no sign of it breaking down, because the broader market is currently putting in new highs. This fact alone, increase the odds of the QQQQ being in a failed head and shoulders top pattern. Furthermore, the indicators and oscillators are all in a 123 bullish trend reversal. The PPO and stochastics are showing very nice bullish divergence. To see what a failed head and shoulders top pattern looks like please look at the chart of NUE below.

Nucor Corp -(NUE) - Example of a Failed Head and Shoulders pattern
The chart of NUE is a classic example of a failed head and shoulders pattern. In the past, I frequently suggested playing the emotional reaction of failed patterns. The emotional reaction resulting from the disappointment of the failed pattern, and being caught off guard and the whole psychology behind that, cause the equity to go higher than if it were to do what it was supposed to do, according the original Head and Shoulders pattern. The original pattern for NUE was a classic head and shoulders pattern. The Head for NUE was at $63.00 and the neckline was at $45.00. If NUE had broken the neckline it would have dropped 13.00 points. In contrast, since the pattern failed it consequently rallied up 50 points. This illustrates the massive point gains that can be made by playing failed patterns. The same process can be applied to a failed bullish pattern, such as a failed cup and handle pattern. This why it is beneficial to use a counter intuitive thought process as part of your trading arsenal.

QQQQ's white charts
On these charts you can see both the head and shoulders pattern as well as the continuation diamond pattern. These charts suggest that the diamond pattern is in play. Should the diamond play out there would be an extremely rapid advance north. I issued a bunch of buy alerts when the QQQQ's dipped to the trend line and held. I issued buy alerts for GIGM, JOYG, ISRG etc... Right now we are prepared by holding long positions. Are the QQQQ's out of the woods? No, because we have haven't broken out of the trading range yet. However the longer we stay in this range the higher the probability for the QQQQ's to breakout to the north. This is because what fails to breakdown breaks out. Nevertheless, I am prepared for either course of action. Now let's go on and look at the Fibonacci retracement levels. If we take the highs and lows in the Nasdaq there are always certain degrees of retracement levels that it will move towards. Even though we are in a cyclical bull rally in the Nasdaq, there are also certain retracement levels that have to be achieved before the final wave down can be put in, that is assuming we are going with our bearish alternative count. Even if we have a bearish alternative count, we can still go higher. My first price objective is at 2680, the second is 3100 at the 50% retracement level. Right now we are just starting the C wave up which is the longest fastest moving part of the wave. This is a realistic objective and it can still maintain the bearish count. In the meantime, I am picking stocks that trade independently of the market indexes.

$SPX and What does the 72% Retracement Level Mean
Any time that you think you are in an impulse wave up, or an impulse wave down, and when that counter trend rally retraces 72% or more, it will negate what you thought was an impulse wave down or up. For example, the $SPX, the DAX, $INDU, $TRANS, $UTIL have all taken out their respective 72% retracement levels. We are now approaching the 90% retracement level for the $SPX which is at 1480. I can assure you that once 1480 is reached, aggressive sellers will come in and we should correct down form those levels. This will not occur until then. Another thing that I want to emphasize is the fact that, when looking at the stochastics, overbought always becomes more overbought. This is when the fastest gains occur. Buying begets buying. Traders chase and shorts cover causing a buying frenzy. Now the $SPX has been overbought for 4 months now. In the medium term we cannot loose sight of the 1480 price objective. In the meantime, I am picking stocks that trade independently of the market indexes.

Edited by :Andrea Victoria Friend aka Daisy
Editorial Assistant for Trending123.com
daisy@trending123.com

$NDX 60 MINUTE

$NDX DAILY

$NDX WEEKLY

QQQQ DAILY

NUE--FAILED HEAD AND SHOULDERS

QQQQ'S DAILY "SMOOTHS OUT THE 60 MINUTE"

QQQQ'S 60 MINUTE A FRACTAL OF THE DAILY

QQQQ'S WEEKLY NOT MUCH BEARISH HERE

NASDAQ FIB. PRICE OBJECTIVES #1 #2 #3

SP500 90% RETRACEMENT ZONE LOOKS LIKE THE NEXT STOP