Possible bearish paths for Nasdaq, Dow
Our forecasts of two weeks ago for the Nasdaq and the Dow have performed fairly well. This post updates those forecasts and also reviews how the previous charts could have been traded (with perfect hindsight, of course).
Soon after the earlier post, price tested and then dropped through our initial support level. It would have been a reasonable intraday strategy to go long upon successive tests of the first support at 12,041 with appropriate stops, exiting at the first resistance area. A similar but more risky strategy would have worked after the first level failed. When price bounced the next day and left an "island," it should have alerted wave-counting traders that a new pattern segment was underway.
As price climbed in wave ii, it noticed and then skipped above the middle resistance target at 12,324 which could have served as an exit point for intraday bulls. Those who favour slower trades might have begun watching for objective signs of a downward turn at or after the cusp of wave 'ii'.
Going forward, we think the Nasdaq is poised to make a strong "middle third" wave during the next few days. Keep in mind the possibility that wave 'iii' could extend more forcefully than the path line suggests. The marked support levels will probably be relevant even if price breaks further or faster than is shown.
If price were to climb much above 12,086, we would need to revise our short-term wave count.
We have June/July as a preliminary timing target for the end of the entire decline, with another window for a possible low (or a higher low) around October.
The Dow has been softer than the Nasdaq recently. That doesn't necessarily mean it's path will be more forceful; it's merely at a different part of its pattern – perhaps a small wave [IV] testing the range between 32,193 and 31,611. If price breaks above that range, we would prefer it not to spend much time above 32,698.
As with the Nasdaq, it's possible for the Dow to fall through supports more rapidly than the path shown. The lower price levels should be relevant even if they are tested "early" in the pattern.
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