Volatility is back
On Thursday, after closing the opening gap, NQ promptly decline breaking key support level 4020 down to its 50-moving average support before bouncing.
Although it bounce off its 50-ma on the 5-minute chart to re-test the gap-close price level, it was not able to break above it to change the bearish dynamics as it quickly got sold aggressively resulting in a nice 5-wave decline before consolidating. At the end of consolidation, NQ either continues its downtrend or reverses back up, the key will be where it trades in relation to its key price level area.
Key price level for NQ on Friday will be 3985
-- Failure to break and stay above 3985 is an indication NQ is going to resume its downtrend that started on Thursday, and tank down to re-test Wednesday swing low. Breaking below Wednesday swing low could attract another round of momentum algo sell programs than has the potential to tank the market very hard.
-- Staying above 3985 could trigger another round of short-covering, resistances are 4005 then 4025.
