Trade Guideline for Friday (NQ)

Sovereign debt crisis currently occurring in the Euro Zone and the resultant unwinding of the dollar carry trade is intensifying global credit contraction, causing global sell-off in equity market. If the problem continues to intensify the sell-off may also intensify. Plunge Protection will continue to be active in the market, most likely more active during overnight trading as we have recently seen the market tends to open with a large gap-up that get sold right from the open.

For Friday I will use 2185 as key Line-in-the-sand

• Bullish above targeting a move up to 2200 then 2220-2230.
• Bearish below, with a potential decline down to 2100. Support levels are 2175, 2155

Trade Guideline for Thursday (NQ)

A failed attempt to break above prior day high led to a choppy downtrend on Wednesday, closing just above support for the day. 

For Thursday if NQ can stay above 2200-2210 support zone I will look for a re-test of Tuesday's swing high. A clear break below 2200 is bearish,  implies a re-test of the low 2145. 

Greece debt default continues to dominate the financial news.

Trade Guideline For Wednesday (Nasdaq NQ)

A large gap-up open on Tuesday implies it was most likely (but not necessary) wave 3 gap. If so, end of day selling was wave A of 4 (see chart below).

If the end of day selling was the beginning of wave 4, then it should not retrace down by more than 50% and it should not break below the the high of wave 1 swing high. If so, I will look for wave 5 to break above wave 3 swing high before reversing back down. One likely target for wave 5 is 2300, which happens to be prior Point-of-Control, (now resistance).

A clear break below 2210 before making a high high (wave 5) implies Monday and Tuesday's uptrend has reversed, and the bigger degree downtrend has resumed, with downside target of 2190, 2170 then 2145. On a hard downtrend, NQ is likely to break below prior swing low (2145)

Trade Guideline for Tuesday (NQ)

NQ closed at the day high on Monday. For Tuesday I will use 2210 as my Line-in-the-Sand.

• If the trend is still up any pullback should not clearly break below 2210. If so, rally target is 2250-2255.
• Below 2210 implies the market is bearish, with decline target down to 2170-2175. On a very bearish downtrend, it may want to test the current swing low at 2145

Trade Guideline For Monday (Nasdaq NQ)

The imminent Greek's debt default will bring down many European banks who owns their debt, and would also bring down many US banks who insured those debt via Credit Default Swap. Although the default is planned to occur at the end of October many investors may want to bail out of their investment ahead of that official date.

As a consequence, equity markets around the world could come under severe downward pressure. I am sure the Plunge Protection Team would be active in the market, pushing equity market up (while suppressing gold and silver down), but there come a time when even their best effort could get overwhelmed by the tsunami of selling orders as credit contraction intensifies.

For Monday I will use 2200 as my Line-in-the-Sand.

• Bullish above targeting a rally up to 2240-22600.
• Bearish below targeting a decline down to 2150-2160, then 2100

Trade Guideline for Friday (NQ)

As anticipated, market opened with a large gap-down on Thursday with NQ closing in the middle range 2179, and also the level I will use for my Line-in-the-Sand for Friday.

• Above 2179 the shorts may cover. If so, NQ may rally up to 2220, On a sustained break above 2220, the next upside target is 2260.
• Below 2190 the sell-off should resume, targeting 2150, then 2100

Trade Guideline for Thursday (NQ)

With the Fed having pushed the equity market up so much ahead of Wednesday's FOMC's decision, the 'no news' announcement, as expected, started a strong sell-off soon after the decision was announced.

Operation Twist

The sell-off should continue unless the Fed keep supporting the market, as the "Operation Twist" would surely eventually kill the banks balance sheet, because the Twist kills the spread between the short and the long term yield, which is the bank's primary profit source.

The Fed does not have any more viable policy options to support the economy. The Twist may prevent banking meltdown now but it is just a matter of time before the whole monetary system collapses and would start off with banking crisis.

For Thursday the sell-off that started on Wednesday should continue below 2300, with key support at 2200 then 2160-2170. On a hard downtrend, the next support below 2160-2170 is 2100.

Trade Guideline For Wednesday (Nasdaq NQ)

FOMC decision will be released in the afternoon and could contain languages that can affect the market in a substantial way.

Key level for Wednesday is 2295.

• Above 2295 is bullish targeting 2320, 2340 then 2370-2380.
• Bearish below targeting a decline down to 2260, 2240 then 2200

Trade Guideline for Tuesday (NQ)

A large gap-down open on Monday was quickly bought perhaps mostly of the Fed engineered to ignite short-covering rally. Ahead of the FOMC decision on Wednesday the Fed would be watching the market very closely as they would not want a sell-off ahead of the decision.

For Tuesday I wll expect the Fed to be very active in the market. I will use 2295 as key Line-in-the-Sand.

• Bullish bias above 2295 targeting 2320, 2340 - 2250
• Bearish bias below 2295 targeting a decline down to 2280 then 2260

Trade Guideline For Monday (Nasdaq NQ)

Nasdaq closed right at the day high on Friday implying the shorts had covered into the close. If the current uptrend on the 5-minute chart is going to continue, any pullback down should stay above key level at 2290.

• Below 2290 implies the market is in a bearish mode and point to a down-day on Monday. If so, target down are 2275, 2260 and 2245
• Above 2290 implies the market is still in a bullish mode, targeting a rally up to 2320 then 2360-2370

Nasdaq NQ 5-minute chart

Trade Guideline for Friday (NQ)

Continued intervention by the Fed helped caused another narrow-range short-covering choppy uptrend on Thursday. The Fed is going to continue to manipulate the markets, pushing equities up (and pushing gold down), as we get closer to the September FOMC meeting where they would likely announce another form of liquidity injection into the global financial system, many suspect that it is going to be an "Operation Twist 2".

As such, if the Fed continue to succeed in pushing the market up, traders who are short will continue to get squeezed, hence uptrend will continue albeit small range and choppy. Will the fed continue to be successful only time will tell, but as long as any pullback down does not violate important support zones the current uptrend will continue.

We must also keep in mind that when fiat currencies finally collapse (hyperinflation) stock markets will rocket up into the stratosphere as we saw recently in Zimbabwe.

For Friday my Line-in-the-Sand is 2275.

• Bullish above 2275 targeting 2300-2310
• Bearish below 2275, implies the market needs a pullback down, targeting 2250 then 2200

Trade Guideline for Thursday (NQ)

With Lehman Brother's style European financial meltdown just right around the corner it was obvious the Fed and the European Central Bank would felt compelled to intervene to support the equity market in a big way, and so they did with the market closing up quite a bit.

The Plunge Protection Team would surely remain active in the market for a while as the Greek default come closer and closer to being official. The Greek sovereign debt default could cause a severe credit contraction that the PPT may not be able to handle.

For Thursday key inflection level on NQ is 2250.

• Above 2250 implies a re-test of Wednesday's high. A clear and sustained break above the high target a breakout move up to 2290, then to 2300-2310
• Below 2250 implies a decline down to key support level 2230. A break below 2230 implies a further decline down to 2190-2200 

Trade Guideline For Wednesday (Nasdaq NQ)

Tuesday's opening above Monday's high almost ensured a trending up day on Tuesday albeit a narrow range up-day. It looks like the market needs to pullback down before it can go up again, as long as it does not violates  key support level.

Key level to watch for on Wednesday is 2200.

• Above 2200 implies the market is still in a bullish mode, targeting 2250 then 2275.
• Below 2200 implies the market needs to pullback down, targeting 2160-2170. A clear break below 2160 implies a re-test of Monday's low 2135 area.

Trade Guideline for Tuesday (NQ)

With the market ready for a massive sell-off right from the opening bell the Fed plunge Protection Team was immediately active with massive buy programs. Although they were successful early in the morning the sell-off resumes into late afternoon. With Obama stimulus speech they were compelled to create a rally to show that the market likes Obama's stimulus program.

Key level to watch for at the open on Tuesday is 2200. If we are going to have follow-through short-covering price will break and stay above 2200. 

• Above 2200 I will be looking for NQ to rally up to resistances, 2220, 2240, 2260 then 2300. 2300 is a very strong resistance.
• Below 2200 implies NQ would likely test Point-of-Control support at 2160 area. If 2160 does not hold then I would expect further decline down to 2100.

Trade Guideline For Monday (Nasdaq NQ)

On Friday NQ opening with a gap-down below key support, as expected, ignited a powerful trending down move that lasted most of the day, with a close not far from the low of the day as a consequence of the end of day and end of week profit-taking. 

With Greece on the verge of declaring bankruptcy and Moody's imminent downgrade of several French banks, credit contraction will accelerate, thus putting downward pressure on equities all across the globe. The Fed and European central banks are sure to intervene to prevent market free-fall. Whether they are going to be successful against the backdrop of accelerating credit collapse only time will tell. 

But whatever it may be, for Monday I will use 2160 as key LIS (Line-in-the-Sand) .

• Bullish above LIS targeting a rally up to 2200-2210. A sustained break above 2210 implies a further rally up ti 2140.
• Below LIS I will be looking for the market to decline down to 2100. A sustained break below 2100 implies a further decline down to 2040.

Trade Guideline for Friday (NQ)

A consolidation "doji" day Thursday with the close near the opening price. Key Line-in-the-Sand for Friday is 2220 with 2240 resistance and 2200 support.


If price stays inside the 2200-2240 range I will be looking for another choppy consolidation day. Breaking out of the range and then staying outside the range should ignite a trending move in the direction of the break.

Trade Guideline for Thursday (NQ)

Wednesday was a pure short-covering day as evidenced by a very choppy up-trending day. The uptrend is starting to look exhausted and may be ready for a pullback down, but as long as it can stay above key price level of 2215 the short-covering should continue targeting a test or a break above August 31st swing high of 2270 area.

• A clear and sustained break below 2215 implies a bearish bias and a potential decline down to 2270 then 2240.

Trade Guideline For Wednesday (Nasdaq NQ)

A big gap-down opening on Tuesday must have caught the attention of the Fed as it was quickly reversed, and the market was in up-trending mode most of the day. Resistance for Wednesday is 2170 and support at 2140.

• Above 2170 implies more short-covering targeting 2190-2200.
• Below 2140 implies a move down to test Tuesday's low.

Trade Guideline for Tuesday (NQ)

With worse than expected employment report released last Friday the Fed will from now going forward be more aggressive with their market intervention activities. How successful would they be is difficult to say as credit crunch is starting to intensify.

• Key resistance for Tuesday is 2200. Above 2200 short-covering can easily push price back up to test August swing high.
• Key support is 2100, a sustained break below can cause a liquidation decline that can easily break August swing low.

Trade Guideline for Friday (NQ)

With most traders out of the office for the long weekend the most likely probability is for the market to stay sideways with most of the activities happening during the morning session. There is always a small chance the market is going to make a big move up or down.

Key level I will be watching for on Friday is 2220.

• Bullish above, targeting a move up to 2260-2280
• Bearish below, targeting a move down to 2180-2200