Yarg! I see the hanging man on the QQQQs

Discussion in 'Trading' started by michaelscott, Jun 5, 2007.

  1. I've been out of the Matrix for sometime now. Today I woke up in a cold sweat to see a hanging man before me. The hanging man is on the Qs and sure sign of impending pullback.

    I took a look at the times in the past when the Qs had hit peaks. I know I have done a similiar analysis of this before in the past, but this is key right now because most times when we see the man hang on the Qs there is a notable pullback.

    The previous trading range of the Qs was in between approximately 45.3 and 43. 45.3-43= 2.3 2.3+45.52= 47.82. Therefore between 47.5 and 48 I had expected there to be a ceiling.

    Another sign of the impending pullback is the RSI and the CMF. We see a divergence of the price and CMF. We also see the Qs hitting the RSI ceiling where, in the past, when it hit this ceiling the Qs pulled back.

    We also have the price that just pulled over the top Bollinger. In the past, we can see sharp pullbacks when the price hit the top Bollinger. This is a classic Bollinger trade where the price will slip above one Bollinger and, like an elastic band, be hurtled over to the other Bollinger.

    The true warning sign for myself is the contraction of the Bollinger Bands meaning imminent expansion.

    Technical analysis aside we can see the fundamentals behind such a pullback. Last year, oil and the ten year yield were at about the same levels when the indexes started to fall. A ten year yield near or above 5% does not bode well for the indexes. Bernanke seems to be very key to the markets. Last year, there was one key speech that set the markets tumbling in May. Seasonality does not bode well for the indexes as May/June/July have not been historically bullish months.

    Then we add other geopolitical events like Iran with its nuke program and then asides by Putin about aiming nuclear weapons at Europe, etc.

    Therefore, I feel the price will pullback to 45.91 at the least in the next 5-10 trading days. I do not expect the price to go lower. If the price does go lower, then we will be entering serious technical difficulties. This should be a good 4-5% pullback in short time.

    There is still a bullish fortitude. After such a pullback and if there is a pivot, I predict we will see another attempt at 47.7-48 area where the price will decide to bounce or blow through.

    I have to issue one very stiff warning. December, January, March on the Qs we saw a triple top. If such a triple top were to form again, then we might see a similiar drop similiar to February thats very stiff and unforgiving. Sailor take warning...
     
  2. jsmooth

    jsmooth

    If you use the most recent (and most obvious high/low levels and do a Fib study) March (low) and the recent highs (last week)...a pullback to around 45.90 is only a 38% fib retracement PLUS its a test of the breakout we are currently rallying from...the market could fall to those levels and it'll still be a bull market; all the major players & funds that trade off longer time frames (daily & weekly) will being buying that pullback with both hands....So dont get over excited about a few dollar retracement in the Q's, it'll just serve as a buying opportunity for the players on the longer time frames

    i doubt we'll turn from a major bull market into a bear market within 5-10 days on a $3 pullback....shit, we dropped 500 on 2/27 and look at were we are now....all you gotta do is keep an eye on the Yen carry trade....we are getting to extreme levels & resistance (right now) at around 121-122 (spot), but its going to take more than a few days and a 300pip retracement to end this massive hedge fund carry thats been adding fuel to our stock market, another retracement will probably just serve as another selling opportunity
     
  3. Maybe we'll see a couple days of MODERATE selloffs, then resume the uptrend.
     
  4. The part I love about the Qs is that the hanging man or the hammer always seem to be very accurate especially when used with Bolling Bands. If you go back through the chart, you can see why I have formed this opinion.

    I looked at the macro picture this morning and have constructed a framework chart.

    We have hit up against the ultimate resistance. So the levels I see that are possible are:

    47.5
    46.5
    45.7
    44.5
    44.0
    42.6
    36.5

    There is a gap in trading that concerns me. If we go back to the later part of 2005, there is a similiar gap in trading in November of 2005. Think back to the early part of 2006 when everyone was so bullish on Apple and Google. Jim Cramer had written GOOG 500 on his knuckles. At that time, the Qs brushed up against 43.15 (ultimate resistance) then they continued to fall to 35.45 6 months later. No one suspected that this would ever take place, but it did.

    Now here we are, over a year later under very similiar circumstances. We see threads on ET stating to "just buy" Google and not to worry. Oil is at the same levels, ten year yield going ever higher. What has changed from last years scenario?

    A dramatic drop from this level is not unlikely no matter how improbable it might seem...
     
  5. that is not a hanging man - hanging man has to happen at new highs, not in the middle of consolidation.
     
  6. You're making a mountain out of a molehill Scott.

    The only reason why the markets are selling off this morning is due to the small rate hike in Europe. The economy of the European countries is growing faster than American economy. A rate hike was widely expected.

    There will be a rebound. Now is a good time to consider covering.
     
  7. buylo

    buylo

    So let's put our money where our mouth is. What trades are you putting on?? Are you short? Are you going short?
     
  8. Sell the dip! I love 100% risk but getting paid for it trades!

    (This means I am short @ 0940)
     
  9. Spot on
     
  10. Lucrum

    Lucrum

    I'm inclined to agree.
     
    #10     Jun 6, 2007