QQQQ : Logical sequence !

I worked late yesterday night.. looking a the the long term chart of the Nasdaq Composite which represents more or less the QQQQ’s (Nasdaq 100) . At one moment I felt a bit like the mad scientist Doc in Back to the Future trying new experiments ! The difference between me and Doc is that I look good !! LOL

Seriously, this is the monthly chart of the Nasdaq I came up with :


As you can see we are trading within this gigantic triangle formation since 1995.. in case you’ve missed it ! Inside that huge triangle we witnessed major rallys followed by sharp declines. I’ve highlited them so it becomes clearer on the chart. I gave each sequence a letter. Rally (A) followed by Fall (A’) and so forth… Here is where I want to bring your attention to… it seems that we are at the end of sequence (C) and starting (C’). This is where it gets interesting. I took a pen and paper and started to measure from bottom to the top of the triangle the following sequences (A),(B) and (C) and from top to bottom of the triangle (A’),(B’). The clue here is to find an estimate of the missing sequence (C’).

Here is what I came up with on my spreadsheet assuming that sequence (C) is ending at 2320 points :


The difference between sequence (A-A’) and (B-B’) is 150 points. Assuming that sequence (C) ends at 2320 points what would it take to have a same differential of 150 points between (C-C’) ? Here you have it : (C’) should fall from about 2320 points to 1410 points in order to be equal to 910 points. You substract (C-C’) which is (1060-910) = 150 !!!

What is even more compelling is that the next target of 1410 as projected in the chart is bound to happen in early 2013 (I tried to draw the leg down C’ as naturally as possible) which coincides with the major support of our gigantic triangle. I will add also that I would expect in the much longer term that this triangle will be broken on the upside in mid 2014 where a new secular Bull Market would start !