QQQQ Patterns

(Click to enlarge image). The Qs have triggered a large complex head and shoulders top pattern. According to thepatternsite.com this pattern ranks 3rd out of 21 in performance with 53% meeting the price target. The measure of this pattern is 13.64 points. The entry is the March low of 41.05, which gives a target of 41.05-.53*13.64=33.82. However, the pattern above has some things against it. Price is making new yearly lows and the right shoulder is extended. Nevertheless, the Qs would need to close solidly above 41.05 to negate the pattern.

From an elliotwave perspective, the Qs have either completed 5 waves down from the August high or nearly so, or are in wave iiic of 3 of (3) of primary 1 down. The former leaves the possibility of a short term rally followed by further declines. The latter fits with the HS top pattern and suggests nearly immediate continuation of the downtrend. On the other hand, the decline from June could be 3 waves meaning that the Qs are in an upward flat correction about to take off in wave c up to above the August highs or wave C up to above the June highs.

The point is not to try to guess which one of the alternatives will play out, but have a plan of action for all of the cases. Don't be attached to your opinion about the market direction. The weight of the evidence suggests further declines, but if those declines do not materialize very soon, a multiweek rally could be underway to above the August highs, if not the June highs. If the declines do occur, the Qs should move down to the 2005 low below 34.72.