QQQQ Update

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Since the July low the longest correction in QQQQ has been 14 days. It went 9% deep. If any subsequent correction takes longer than that, it would be a possible topping sign. Obviously the market sentiment is extremely bullish and this current time and % gain is extended compared to historical instances. So a significant correction against the trend is likely soon.

The principles here are that after an extended advance, a larger and faster decline than any in the uptrend often signifies a change in trend (even though by the time it is recognized and confirmed the first leg down may be completing). Also a more time consuming and larger correction after an extended move is often a sign the trend is weakening and has reversed.

If the current correction in QQQQ were to fall from here to new lows, then it would likely be longer than the first correction of the trend in August. The chart above puts a red dashed SELL line suggesting that if the recent swing low is broken to the down side, it would likely trigger further selling.

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As of right now, the upward correction in QQQQ may be forming a bearish ABC pattern with the harmonic resistance zone at 58.42 or slightly above that into the unfilled gap down area. Also the ideal time frame to complete is early next week (the upward correction would be 1.618 the time of the initial thrust down).

I would like to see one more push up to create some divergence on the 30 min chart MACD and then look for possible selling opportunities on weakness after that. Another possibility is that the current upward move is a small rising wedge against the first thrust down. A break below the uptrend line, would be indication the wedge is complete.

An alternate view of this correction is that it may be a triangle that is completing here and should lead to a thrust up to new highs.