Nasdaq Monthly Price Chart Showing Shooting Star Reversal Candlestick

There are two trading days left in February and currently the nasdaq composite index is showing a very bearish looking monthly shooting star reversal that has formed after testing the old 2007 all time highs.  This is clearly a sign of supply coming into the market and suggests we will have more downside in March 2011.

It will be interesting to see how much upside the nasdaq can create during the next two trading days or the last two trading days of February 2011 because it will either create a near perfect monthly shooting star candlestick or something less than perfect.  Assuming we do get a reasonably ‘good looking’ monthly shooting star reversal candlestick, then we would need to see bearish confirmation ideally during March 2011.

I suspect that 2500 to 2550 is in store for the nasdaq in the weeks/ months ahead.  Interestingly, if we do initiate a 1 to 4 month decline from the current time frame it could lead to the market forming a low instead of a high into the mid June 2011 8.6 year Marty Armstrong Cycle Model Turning point.  It is still too early to get enough clarity on that, but I am open to mid June 2011 either being a low or a high.  If it is a low, then likely everyone will be very bearish mid June 2011 and it could turn out to be a huge buyable low.

nasdaq20110224

Note other previous monthly shooting star candlestick reversals in the nasdaq in 2001 and 1998.  The topping tail on the current shooting star is not as long as I would prefer but it may still have some bearish potency.

Note also that there were two long topping tail candlesticks in 2001 before the market was able to crumble down.  It is possible we might do the same this time around as we try to push up into the 2007 highs again but then again get rejected on the over hanging supply up there.

At this point I would say a move to 2500 to 2550 would be a quite normal type of market occurrence in that it would simply be a retest of the breakout area through the neckline (horizontal red dotted line).

A move to 2500 to 2550 in the nasdaq on a daily and weekly basis would probably be perceived as extremely bearish, but when we look at such price action within the context of the above monthly candlestick chart it paints a picture of normal market action (or a normal Wyckoff retest type action).

P.S. The daily action on the sp500 delivered the almost standard scripted hammer reversal today and seems to support a small upside bounce from here.  The sp500 is still holding channel support but I forgot to point out yesterday that the nasdaq broke down through its uptrend line since September 2010, an important bearish sign…

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7 comments on “Nasdaq Monthly Price Chart Showing Shooting Star Reversal Candlestick
  1. JR says:

    The Nasdaq McClellan Oscillator is very interesting. It turned today at -50. Every time it bounced off of the -50 level in the last six months it triggered another fairly substantial move to the upside. Additionally, just as in November we see the Nasdaq bouncing off of it 50 MA.
    I noticed the talking head shuffling BS that QE2 is about to have an abrupt halt.
    I don’t know how many times Big Ben has said he is going ahead and not stopping until he hits announced goal which should occur in June–Not February or March.
    My Nasdaq stocks did very well today as I played the bounce.
    My suggestion to my Bear friends, this is not it!

  2. Tom Tom says:

    When this correction is finally over it will probably get some type of kick start from an announcement of QE3 or something similar…

    The Dollar keeps breaking down. I wonder what the sentiment is in the dollar index right now…

  3. ed says:

    I’ve been waiting for the Inverse H$S on the Nasdaq to start a return move back to to neckline. Thanks for pointing out the Doji. We’ll see how it finishes the month

  4. JR says:

    It is interesting to listen to the talking heads telling everyone that EW reached a wave (v) and is pointing to a correction.
    NOT! Incidentally, I think the smart talking heads know this. This is total misdirection so they can continue to go long and make money on these tiny corrections. In other words they are just plain fibbing! WARNING: don’t believe anything you hear on the financial stations. It just may be that the commentators are not honest.
    Anyone who knows anything about EW knows we just bounced off of wave (iv) and EW is signaling a new high. The count is for example on the $SPX as follows: (i) 1302, (ii) 1175, (iii) 1344, (iv) 1294 bounce!
    Classical EW is showing on the $SPX a megaphone pattern which anticipates a new high! That is before we look for any major correction.
    But back to the fundamentals. Big Ben is only tolling 10 bells. The bears will have to wait a while before they hear 12 bells!
    I already gave you my read on the NASDAQ, boing, boing!!
    Sorry bears!

  5. Tom says:

    good observation on the broadening wedge formation. I can’t speak to the Elliottwave portion but I would say I am not surprised there are conflicting counts..

    You could be right about a new high but I am a bit skeptical still… Lets see how we do on the 61.8 retrace of the decline..

  6. Geoff says:

    I was surprised in this weeks Barron’s (Feb 28th issue) that Consensus Bullish Sentiment was a whopping 75%! In the immediate term, I think market will be ruled by world events and I think major nations (USA, Germany) are pulling all stops to stabilize. If stable or resolved markets keep going higher. Probability is USA / Europe will succeed but IF the ME contagion continues I think nothing will save the markets from unexpected sharp spill – – – probability less than 20%.

  7. Tom says:

    If the US government shuts down the end of this week it may add a little bit of fuel to the fire as well. Will be interesting to see how Monthly candlestick for February closes.

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