The Uptrend Is Over
So what has caused the market to sell off in the "best" calendar month of the year? Let's cut to the chase. The uptrend is over for the NASDAQ Composite. There was no significant news that I heard of to start this sell-off.
Several weeks ago in the Idea Chamber I posted a chart that said scared the heck out of me. I illustrated what I thought was a completed Bullish Impulse wave pattern for the NASDAQ Composite. If a Bullish Impulse wave pattern has completed, then a corrective wave pattern is next. That means the market is in a correction.
This is a 20 year monthly candlestick chart. A Hanging Man candlestick pattern formed for September. October's candlestick looks like it is going to develop into a Bearish Engulfing candlestick pattern. Two extremely bearish candlestick patterns back to back. And since these formed on a monthly candlestick chart, it is indicating a longer-term correction.
The MACD Histogram was showing a slight decrease in buying momentum and even had increasing buying momentum through September. However, I warned in the Idea Chamber that the last week of September was the best time to take gains based on the chart patterns developing. Now that October is almost complete, the downtrend has almost been confirmed.
Bullish Impulse Wave Pattern
When wave 5 of the Bullish Impulse wave pattern develops into an extended wave pattern like the NASDAQ did, then the pullback area is the bottom of wave 2 of the extended wave. That seems to perfectly match up with the previous high from the internet bubble around the year 2000. Coincidence? I think not.
The Elliott wave book I use for reference says the move will be fast and painful. So how fast and how painful? I know the painful part, and you won't like the answer. If the Bullish Impulse wave pattern is complete and the uptrend is over, which it appears to be, then the 5,000 - 5,100 price level will be the target pullback area for the NASDAQ Composite. Yes, I said the 5,000 - 5,100 price level - that was not a typo.
The harder part is the time frame. I wish I knew an exact answer for the time frame but I don't. What I do know is that you will want to be in mostly cash if the 5,000 - 5,100 pullback is the target. When I look to other potential "market tops" like the year 2000, the move happens pretty fast to the downside. The market always takes the stairs up and the elevator down.
I'm imaging that the move happens in a matter of months and will catch most off guard and not allow most time to sell. I'm hoping we still get an earnings season that gives some relief which I intend to sell into.
Relief in the Cards?
I placed a red Fibonacci Extension Tool on this next 1 year daily candlestick chart for the NASDAQ. The NASDAQ pushed all the way down towards the…….
If you want to continue reading this article for the NASDAQ Composite that indicates the uptrend is over, you must first login. A short-term relief area is provided and short-term strategy is discussed for most portfolios.
This is a time to check in on all the stocks in your portfolio. Do you know where support areas are for your stocks and their share prices? The market is at a critical stage of its uptrend.
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There are some additional insights as well as a revised price target for the NASDAQ, lower than the 5,100 price level I mentioned above. It is more bearish. Become a Trendy Stock Charts member today and find out where the market is heading so you can profit from it.