Thursday, October 16, 2008

NASDAQ Technical Picture - Double Bottom

After a modestly positive open (CPI/initial claims and LIBOR), the markets reversed at 10:00 on weak capacity utilization data followed by higher than expected crude inventories. The NASDAQ futures and Nasdaq 100 breached last Friday's lows and immediately snapped back. The lower lows were not confirmed on the COMP or the broader averages. A retest of the morning swing highs was followed by a lot of backing and filling midday.

The second half of the afternoon felt very bullish as most of the averages carved out bullish hammer reversal bars and closed near the highs. I am cautiously optimistic on the double bottom scenario. As noted in my previous post, I put some retirement money to work this afternoon and I'm holding overnight, which I haven't done in a long time. GOOG delivered on earnings after hours which is a big plus going into OPEX tomorrow.


8 comments:

QQQBall said...

was working today & will be out tomorrow. looked up to see the Qs had tested S on lighter volume & throwing a nice hammer... caught alot of the late day run... sold under 32... 31.97, which at the time was near the previous pivot high. pretty discretionary trade...

nice trade... quick too.

Jamie said...

QQQ,

Feels good to get long again.

John C. Lee said...

agreed with the 2B

lars said...

yea that's a little tight and a little too quick (after a 4000 point drop) for me to starting thinking "double B" I'm thinking more like sideways flag.

also looking at the weekly.... I find it a little hard to believe that we'll go from a bearish morubozo to inverted hammer and then start moving back up.... maybe for a short period of time.... but to me... this base only justifies enough of a run to convince most of a bottom before price again moves lower... in other words... a false bottom like we saw earlier this year.

i am unfortunately still bearish. i am wanting to get bullish but cannot yet allow myself to become bullish.

larry

Jamie said...

Hey Larry,

Many factors working against the bull scenario including the run on fund redemptions in the past weeks. But I sense that the bears are weary after all this selling and it may take time for them to renergize enough to push lower in the absence of another major crisis.

If we manage to make our way back up to the bearish gap resistance, the bull/bear battle will determine the short-term winner. In the meantime, I'm getting my feet wet on the long side.

lars said...

no question about it... if we break the gap with a proper volume comparison and i get my proper volume pull-back entry I'll be long.

fund redemption's are not the problem this market has.... some large interests are record net short and most of this is short covering.... I'd have to check but I'm confident open interest would verify this statement.

My argument is simply this.... professional shorts are not going to buy-up against themselves. they will cover in a systematic way that allows them to suppress price while still "net" covering. the reason i think we'll move sideways as opposed to up is simply because I'm not sure how many fresh longs are going to join the party to compete with the short covering.... and outside of short covering who really feels "rushed" to get back into the equity markets?

lets not forget how many times this market has "bottomed" and trapped investors and traders in. i personally have still not seen my signal to enter with retirement money for a longer time horizon.

maybe we run back up and fall back down ... dead cat bounce style... that would be a big bounce....

either way I'm not that bullish and still more bearish than bullish but leaning in the direction of sideways consolidation.

that's my opinion anyways.

larry

lars said...

correction::: fund redemption's are not the (only) problem this market has

Jamie said...

Interesting. Open interest is neutral at 0.97. Put buying peaked on Oct 6th and has been moving lower in waves since that time. Not exactly bullish just yet but could be trending towards it. Definitely something to monitor closely.