Nasdaq on the Cusp of Capturing July's Target, Reclaims 39-Year Resistance

By Jason Haver  OCT 30, 2013 10:20 AM

The long-term charts continue to highlight the importance of the market's current intermediate inflection point.

 


In my last update I discussed the fact that the market had reached a larger inflection point, and that one targeting method suggested S&P 500 (INDEXSP:.INX) 1777 (+/-) as a possible target zone for this wave at intermediate degree.  We're almost there; and it's worth mentioning that the long-term charts indicate rising trend resistance is approaching.  As I see it, we're now in a do-or-die situation for bears, and I'll outline this with a couple charts.  If this market clears approaching long-term resistance, I think we have to go back into trend-following mode until proven otherwise.  First things first, of course, but I want to put that warning out there well ahead of time.
 
The 30-minute chart shows the recent breakout over a cup-and-handle formation which, interestingly, also targets roughly 1777.  If this is a standard five-wave rally, then it should be nearing completion -- but please note the caveat in blue on the chart below.  It's always interesting to me when the stock charts align with events, and we have the FOMC announcement today.  If trading today, keep in mind that the first semi-convincing directional move in the wake of the announcement is often a fake-out.

Author's note: The date in the chart below includes a typo. The date should read "10/30/13."
 

Click to enlarge
 
The daily chart shows approaching resistance which isn't visible at smaller time frames.  The blue channel line connects the peaks of  waves (1) and iii, and theoretically represents a rising resistance zone.  Looking beyond that point in advance, in the event bulls can break out over that level and hold it as support, then look out above, because the rally would likely pick up steam with clear sailing overhead for the foreseeable future.  Again, first things first, though...
 

Click to enlarge The next chart hasn't been updated since July 17, but it's become relevant again, since the Nasdaq Composite (INDEXNASDAQ:.IXIC) is now on the cusp of capturing my intermediate target zone.  What's particularly interesting on this chart is Nasdaq's recent breakout over a 39-year trend line -- and while that's par for the projection, it always looks more convincing once the market actually realizes the projection and breaks out...  so as this target approaches, bears are moving into a do-or-die intermediate inflection zone.  The last time we saw an inflection zone of this magnitude was back in December 2012.
 

Click to enlarge
 
In conclusion, the S&P 500 and Nasdaq are both approaching major intermediate inflection points.  As I see it, this is a zone where bears will either need to make a stand or head back into hibernation for the foreseeable future. Trade safe.
 
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No positions in stocks mentioned.

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