NDX - April 17, 2010

Before the market open on Friday, I raised my level on NDX to below 2000. Friday panned out as a hard down day for the market but the level I had in mind was not violated.

This is a weekly chart of NDX


Technically, not a whole lot has changed from last week. NDX rose about 1% for the week. It is still overbought and still in the 1970-2050 band formed based on two failed peaks of 2008.

Index is hitting the underside of the mid-line of the purple channel that has so far been guiding me well.

Right now, the 1970 area looks like very good support. If NDX manages to further pullback or go sideways and work its overbought conditions, it may offer an entry north of 1970 area. If NDX breaks above 2050, if may attract momentum players, setting the 2050 as support. I would personally prefer a buy in the 1970-2050 zone. But, before all that, we have to see if (or when) NDX finally corrects, and how it corrects. We also have to see the true reaction of the market to Goldman drama from SEC after all players have had time to recompose themselves and evaluate the situation.

This is a daily chart


I have had a purple channel on the above chart for days. Notice how the center line kept the Friday drop in check. I have marked the 1970-2050 area on the chart, with 2015 as a median. Notice that 21 EMA is also in 1970 area at this moment. Also notice that below the current resting point on the mid-channel line, there is not a whole lot of chart support until 1970.

Again, before getting excited about a new purchase, I would like to see some shake out or correction and see how index would behave under stress.

This is 60-min chart


Friday gave us the first unfilled gap down in a long while. So we have a 2030-2038 that is for now a resistance. Friday also did a fill of a gap that NDX had opened on the way up in the 2006-2013 range. Notice how the 2006-2013 gap acted as shock absorber on Friday.

There also is the top of the most recent breakout around 1980-1988 that looks like technical support in here. A bit more softness may actually bring both price and 89 EMA to that zone and set up a long entry.

Again, all of this is in the context of the ongoing uptrend and subject to me seeing how index corrects if/when it corrects.

I had a channel on the 60-min chart that did very well for quite some time. I have slightly readjusted that channel to contain the latest run-up. Also, notice that the mid-line of the channel is the same area of the gap that got filled on Friday, offering support to the drop in the index.

Below 1980, we have the lower line of the channel that may end up being in the 1970 area that we discussed above.

Below 1970, index runs the chance of a mid-term trend reversal.

NDX is oversold enough on the shorter time frame to catch a bounce if bulls are still at it. Regardless, I need to see how it carries after Friday's SEC-Goldman blah-blah roasting of call holders. Ideal situation for a long would be more selling to cool off the daily frame a bit but not so much to change the technical profile of the market. As long as index stays within, or above the levels I discussed above, it’s either consolidating or rallying

Long term trend is up. Mid-term trend is up. short term is up.

Enjoy the Rest of Your Weekend!