Our researchers believe the NQ and YM chart illustrates a very different dynamic which is currently at play in the US Stock Markets. The NQ, the Technology heavy NASDAQ futures, appears to have stalled near the 75% Fibonacci price retracement level whereas the YM, the Blue Chip heavy DOW futures, has already rallied past this level and is setting up a “double top” formation near 26268. It is our belief that the US Stock Markets are already nearing an intermediate top rotation price area and that traders need to actively protect their long trades/profits right away. We believe a downside price rotation may take place very quickly over the next 5~10+ days and that the markets may rotate downward by a minimum of 4~6% in what we are calling a “momentum rotation setup”.
This first chart of the YM on a Weekly charting basis shows how dramatic the upside price move since December 24th has been It also shows the current high prices are very near to the high price levels near the end of November 2018/early December 2018. We believe this “intermediate double top” formation will prompt a downside price rotation towards support near 24985 (or a bit lower). This represents a -5.5% price rotation and will likely frighten a few long traders. It will also embolden the shorts to start to power back into the markets expecting “This is IT! – the Big One”. We believe this downside price rotation will become a very healthy moderate downside price swing that will revalue equity prices, re-establish support and prompt a new upside momentum move that may eventually break all-time highs later this year. In other words, we believe this rotation will be an excellent buying opportunity for skilled traders. We show our volatility VIX setup forming here.
This next NQ, NASDAQ Futures, Weekly chart highlight the dramatic difference between the Blue Chips and the Technology sectors. Unlike the previous upside price swings, between 2016 to early 2018, where the Technology sector was the big gainer, this time it appears the Blue Chips and Mid-Caps are the strongest sectors in this recent move.
We believe this divergence between active price levels may continue through most of 2019 as traders and investors appear to be concerned with technology and the capability of continued earnings/growth going forward. It appears global investors are more likely to move capital into Blue Chips and Mid-Caps because of stronger earning capabilities, dividends and overall strength of price appreciation.
If our prediction of a 4~6% downside price rotation come true, then we believe the Technology sector will likely result in a larger price rotation than the Blue Chips, Mid-Caps & S&P500 sectors. We believe this downside rotation is about to hit the markets currently as the NQ has stalled near the 75% Fibonacci retracement level and our proprietary modeling systems are suggesting a “price anomaly” has setup in the NQ.
Be prepared for a moderately large, -4~6%, downside price rotation over the next 5~15 days where support will likely be found near the -5 to -6% levels for the YM and ES. The NQ may fall a bit further towards 6295 ~ 6773 (-6% to -12%). We believe the weakness in the technology sector will be much greater than the Blue Chips and Mid-Caps.
As skilled traders, we urge you to properly protect your open long positions and prepare for this price rotation. Our team has 53 years of experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.
Technical Traders Ltd.
Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and author of the book: 7 Steps to Win With Logic
Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.
His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.
He has also been on the cover of AmalgaTrader Magazine, and featured in Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites.
Disclaimer: This material should not be considered investment advice. Technical Traders Ltd. and its staff are not registered investment advisors. Under no circumstances should any content from websites, articles, videos, seminars, books or emails from Technical Traders Ltd. or its affiliates be used or interpreted as a recommendation to buy or sell any security or commodity contract. Our advice is not tailored to the needs of any subscriber so talk with your investment advisor before making trading decisions. Invest at your own risk. I may or may not have positions in any security mentioned at any time and maybe buy sell or hold said security at any time.