NASDAQ Hit the Hardest

Oct 15, 2008: 10:25 AM CST

Of the major US Equity Indexes, the NASDAQ has suffered the most on Tuesday and now on Wednesday, and was only able to retrace to the 38.2% Fibonacci retracement of the August highs to the October lows.  Let’s see this index on the daily and weekly charts:

NASDAQ Daily Chart:

Price clearly made news lows into 2008, which also were new price lows (1,550) not seen since 2003.  The technical picture favored a retracement going into this week (actually favored it towards the end of last week yet price continued to fall), with initial retracement targets being the 38.2% Fibonacci retracement at 1,899, and secondary resistance via the falling 20 day EMA at 1920.

Also, there was expected to be a time component, taking at least a few days to meet this objective.

From the looks of things as it stands now, we met that Fibonacci objective in three short days before the retracement – as it appears currently – completed.

Notice also the new significant momentum low, registering beneath -150.  This means that the difference between the 3 and 10 day EMA reached a spread of 150 index points – remarkable.  New momentum lows frequently precede new price lows, so be aware of this.  We’re not currently far away from testing these new price lows soon unless the situation changes.

On to the weekly chart.

NASDAQ Weekly Chart:

Price found tentative support about the rising 200 week SMA, though it violated it on two closing instances prior to the official break in September before breaking down to new annual lows.  One could have drawn a triangle (draw a trendlne beneath the lows) which represented price consolidation which would have favored eventual price expansion – we got that expansion via the recent surge to the downside.

Elliott Wave analysts likely identify a full Elliott pattern (Wave 1) from the October Highs to the March lows, with an “ABC” corrective pattern from March to August forming the larger Wave 2.  If this is the correct count, then the NASDAQ and other equity indexes are in (or are completing) Large Wave 3… meaning there’s a Wave 4 up expected and then a Wave 5 down to new price lows yet to come according to that count.

Stay alert and don’t get complacent either long or short in this volatile environment.

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