The Nasdaq (^IXIC) has gone from hero to zero in about three days.
There are probably many explanations for the Nasdaq’s temper tantrum. Technical analysis offers the most logical (and duplicatable) reason.
A number of my prior articles encouraged investors to watch upcoming resistance and immediate support. Why?
Just last week the Nasdaq-100 (QQQ) was trading within striking distance of serious double Fibonacci resistance at 3,266 – 3,280 (the October 2 high was 3,256).
In addition, two long-term cycles are projecting a market top for 2013/2014 (more below).
Resistance levels for stocks are like traffic lights for cars. Resistance levels don’t guarantee that stocks will stop and take a u-turn, but – like a traffic light – they are the most likely place for a stop and/or u-turn.
The Nasdaq-100 chart below shows the key Fibonacci resistance and other trend lines we’ve been watching.
Yesterday the Nasdaq dropped below the upper black trend channel line and the longer-term red trend line just below.
The October 6 Profit Radar Report warned that: “We may be dealing with a bearish rising wedge and a deeper fall. We will go short with a drop below 3,185.”
The corresponding trigger level to go short the S&P 500 (^GSPC) was 1,665.
As the Nasdaq chart above shows, there is no real support near current trade, so lower prices are still likely.
VIX (Chicago Options: ^VIX) seasonality suggests that stocks will rebound soon, but a 13 and 7-year S&P 500 (SPY) cycle suggests that the coming year will be very tough for stocks. A much more detailed forecast is available to subscribers of the Profit Radar Report.
For more details on VIX seasonality click here: VIX Seasonality Near Best Turning Point of the Year
To read the full article about the 13 and 7-year cycles click here: 13-Year S&P 500 Cycles Project Market Top
Simon Maierhofer is the publisher of the Profit Radar Report.
Follow Simon on Twitter @ iSPYETF
More From iSPYETF
- VIX Jumps Above 5-Year Old Trend Line Resistance
- VIX Seasonality Near Best Turning Point of the Year
- S&P 500 Will Be In Trouble if it Falls Below this Support