QQQ Neely Signal

Biggest One-Day Slide Since August 2015 Suggests Deep Retrace of Move

On Friday QQQ Put In Its Biggest 1-Day Slide Since August 24, 2015 - That's a Neely Signal

On Friday QQQ Put In Its Biggest 1-Day Slide Since August 24, 2015 – That’s a Neely Signal

On Friday QQQ slid 5.79 points from the day’s high to low. That is the biggest one-day slide since August 24, 2015 (the capitulation move of the China bubble crash). That is a Neely signal that the move out of the August 24, 2015 low has just ended.

That suggests QQQ has started a deep retrace of that move. However, unless QQQ crashes more than 9.50 points on Monday, it suggests QQQ has higher to go after a partial retrace of that move.

QQQ reentered its pink rising wedge Friday and ended the day with a retest of its top.  It’s likely to continue down to the rising wedge bottom and beyond to at least the orange megaphone VWAP and the bottom of the silver rising megaphone.

That will be a critical decision point.

Critical Decision Point will be at 105-106ish

QQQ could reverse hard at the silver rising megaphone bottom for a breakout upwards from the orange and light blue megaphones and the silver rising megaphone into a truly magnificent move up with a target of roughly 200 (green scenario).

Or QQQ could start a megaphone there (purple scenario) that breaks the price out of the silver rising megaphone to set up a new rising megaphone (red on chart).  That would imply a new all-time high within the light blue megaphone and red rising megaphone, but not a move to 200.  Instead, QQQ would likely be putting in a double wave up within the light blue megaphone and setting up a swing to its bottom.

The Larger Crash Scenario

If QQQ is going to put in a candle larger than 9.50 points on the correction to 105-106ish, it will likely do so as part of a price channel crash set-up that takes QQQ straight to the light blue megaphone bottom before another swing to its top.

The Bots

Studies show that high-frequency trading bots tend to suppress volatility. I don’t have enough data to know how this affects things like the Neely signal.

So even though this signal back tested well for decades, keep an open mind about the possibility of a megaphone starting here rather than an immediate correction.

The Price Action to Watch For

However, the price action usually won’t lie.  If the market’s heading down from here to 105-106ish or beyond, the move would usually start as a price channel.  In the critical decision wave, we’d usually see either a conventional breakout into a series of melt-down channels, or we’d see a large falling megaphone bottom start.

Large falling megaphone bottoms tend to break out of a price channel like a conventional melt-down set-up, then retrace all the way to the price channel top, then break down out of the channel past the first channel breakout.

Either could reverse at 105-106ish, but a falling megaphone would be a tell that a reversal there is a strong favorite.

Plug for a Friend’s Fiction Site

My blackjack team partner, Arnold Snyder, publishes a fiction website at Write-aholic.com. The site has reviews of novels and Arnold’s own fiction.  If you like fiction, I think you’ll like the site.

He wrote one of my favorite short stories, Finding God on LSD (A Short Story About Schizophrenia) and is now publishing online a series of short novels he calls Smut4Nerds.  Hilarious.

He also wrote Risk of Ruin, which I happen to like a lot. It’s a novel about an antisocial profession gambler/biker who ignores the odds and takes up with a stripper who believes she’s God.

27 Comments (To enlarge images, right click on image & then click "view image") → QQQ Neely Signal

    1. scarecrow

      what an insightful article, thanks for sharing.

      been thinking about what he wrote about in last section all weekend. in an era of enormous liquidity, if a bubble pops, where does capital flow?

      this is also rich:
      “As the price variation speeds up, the no-arbitrage conditions, together with rational expectations, then imply that there must be an underlying risk, not yet revealed in the price dynamics, which justifies this apparent free ride and free lunch. The fundamental logic here is that the no-arbitrage condition, together with rational expectations, automatically implies a dramatic increase of a risk looming ahead each time the price appreciates significantly, such as in a speculative frenzy or in a bubble. This is the conclusion that rational traders will reach.”

      think about who you are (rational trader?) and then think about those who are defined by “passive investor”. what is the % of each category in the herd?

      Reply
    2. Trader-Moe

      EWTN, I don’t like the way Hussman fitted the Sornette pattern to the chart.

      If we’re in a Sornette bubble, it’s a lot earlier in it than he thinks, I think.

      Hussman knows a lot more about other indicators and value than I do–I assume he’s right on all of that.

      Reply
      1. ewtnewbie

        Glad to hear your opinion and insight Moe on that. You are the Sornette King, and I agree, if we get another move up, up, and away (as Armstrong has said numerous times is very possible, but not the ONLY option) we are going to go parabolic! Basically, capital inflows from around the globe head to the US…and we go to the MOON! Even Armstrong says that a decent “crash” needs to occur first in order to get the folks on the wrong side of the boat to run them over and propel this thing as the first leg, and then money flows in behind that initial short covering push. Could very well go tag 2000-2150 and then rocket ride. :-)

        Reply
  1. Rose

    They r not astrologers. But in their analysis they have planets. Like neptube is okanet for oil. Affects prices of oil when ut goes retrograde. I dont kniw there us something about solar eclipe on aug 21. They all are saying may be they r all wrong. But may be it will cause. Wave 4 diwn foe elliot wavers and then wave5 up.

    Reply
  2. Rose

    Moe. Merriman has been saying. July 26 to aug 21 very imnious. War like. Mahendra has been layering oct puts. Expects after early july. He has uvxy. Av price 16. Expexting 20 to 30 per down draft. Macdough. Is expecting another high around june 20 or so. Or if it is low. High than wedge breakdown. In aug. Thete a solar eclipe they are all. Saying clashes with mars of trump. War or something

    Reply
    1. SnakeOiler

      Rose are these astrological advisors? If so, which ones do you like? Asking cuz I keep an open mind. Never traded off that before but emotions do seem to run high around the full moon.

      Reply
      1. SnakeOiler

        Moe, Is 9.50 points the number that would melt down the channel? Is that part of the Neely signal? Thanks in advance.

        I would also urge everyone who enjoys gambling to read all the Snyder articles on BJ Forum online at the link top right. Great stuff. The article about camouflaging counting by using a progression bet during neutral counts…brilliant!

        Reply
        1. Trader-Moe

          Snake Oiler, the 9.50 points is the drop from the open to the low on Aug. 24, 2015.

          So Friday’s single-day drop was bigger than any single-day drop since then, but not larger than that drop.

          That means it’s supposedly starting the retrace of the move from the August 24, 2015 drop.

          If Friday’s move had been larger than 9.50 points, we’d expect a retrace of the move from a still larger drop. I believe that would mean a retrace of the entire move out of the 2008 low.

          Reply
      2. Sam

        Went short on Friday, but I was nervous because of the incessant dip buying, we have been seeing lately. So I feel more confident about the trade now, so thanks for that. I will add more if it acts right.

        Reply
          1. someone

            Thanks a lot for the analysis, Moe. I wonder what instruments you prefer to use? Shares, options, futures or some kind of combination? Myself I prefer options and futures. I understand it’s a kind of preference and availability though…

            Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>