In our last update on the NASDAQ Composite [see: Nov 4 Update] we called a top and forecast a drop to the 200-day moving average, then at 14,181.

If this channel holds, then the push past the 3.618 will reverse itself and the index would be susceptible to significant downside. I suspect COMP is going through the same exercise as SPX, DJIA, etc: Don’t tag the SMA200 until it represents a higher low than the last one. In this case, that would be the Oct 4 low of 14181.

As it turned out, we were two weeks and 1.5% early. During those two weeks, the 200-DMA’s rose from 14,210 to 14,661. But, it remains our next downside target – a 9.6% drop rather than the 11.2% one originally anticipated. The bulls had better hope it holds.

continued for members…Remember, this is just the first line – the .236 – of the rising purple channel at just below the SMA200. We’ll call it 14,575.  FWIW, a 10% correction would land COMP at 14,591 and a 20% plunge would put it at 16,929 – not far from the red .886 and purple 161.8 Fibs.

Stay tuned…