NDX lost 83% of its value between 2000 and 2002. Its 2007 high came close to retracing a Fibonacci 38.2% of the losses before the next crash lopped 56% off the top. Now, as it tags one important Fib level and approaches another, is there another big correction around the corner?
What does it mean that the latest red channel — parallel to the one formed off the 2002 low — just broke down?
The major channels generated by NDX’s 1994, 2000 and 2008 lows are shown below in white and purple.
NDX just nudged the purple midline, and is closing in on the white .382 channel line. But, the placement of very long-term channels is subject to interpretation/error, and being “just a little off” can lead to large errors in forecasts. So, we look to other indicators for confirmation.
A large Crab Pattern (in white) dating back to 2007 recently completed at 2993 — very close to where the purple midline crossed.
The May 22 high of 3053 would be a relatively easy “top” call if not for the fact that the yellow IH&S target is still a few points away at 3100 and the .618 retracement of the drop from 4816 to 795 is 227 points away at 3280.
NDX reacted nicely at 3053, shedding 228 (7.5%) before beginning a rebound that, like SPX, recovered slightly more than .618 of the losses.
So, top or not?
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