NASDAQ Comes into Confluence Monthly Resistance

07/13/2009 10:26 am EST


Corey Rosenbloom

Founder and President, Afraid to Trade

This is something I haven't heard anywhere else yet: With everyone focused on the S&P 500 head and shoulders pattern, people have let one fact slip by them. The NASDAQ index (COMPQ) is coming into confluence resistance via the 200-month SMA and the 38.2% Fibonacci retracement. Let's take a look:

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First, price is quite obviously in a monthly downtrend (lower lows; lower highs; 20-period EMA lower than the 50-period EMA; price beneath all three EMAs), which is the dominant structure until proven otherwise.

Price recently crested gently above the 200-month SMA in June, only to fall back beneath it quite bearishly in July. Look what happened in 2002 when price last interacted meaningfully with the average—we couldn't get a close beneath this level, which marked the end of the bear market at that time.

Now it will be a bad omen if the bulls can't retake price above it.

For now, we're also inflecting downwards off of the 38.2% Fibonacci retracement of the 2007 high to the 2009 low, which comes in over price at 1,877.

To make matters worse, price formed a spinning top bearish reversal candle at this current confluence level just south of 1,900.

If this structure and probability holds, it forecasts a downward move, which is in line with the bearish head and shoulders daily pattern on the S&P 500.

This is just one more hurdle eager bulls have to overcome, and I'm just not sure they can do it.

By Corey Rosenbloom of