The Weekend Update
The previous Weekend Update outlined two scenarios, the Bearish and the Bullish ones. On Friday I updated the bearish scenario and noted that bears had to keep NQ under resistance 11,328 to keep that setup alive.
On Friday bulls managed to break over that level and invalidated the bearish scenario.
Now we can focus on our bullish scenario:
That strength in NQ is a strong argument in favor of the bullish scenario we have discussed many times. According to that scenario, NQ may produce a bear market rally, a subwave C of a corrective wave (B) up and make another lower low (see the red target box).
Any bear market rally in subwave C has to start from a micro -i- up, -ii- down long setup.
Let’s zoom-in to 60 min chart:
Bulls can argue that NQ has completed that bullish -i- up, -ii- down structure.
Under that count the rally should keep going at least up to 11,630 without much pullbacks. But when the price goes parabolic at that early stage of a rally that often turns out into a false start.
Here we have potential for a tricky wave count identical to the one we discussed today with regards to ES-mini. That wave count considers this pop as a corrective subwave -b- up to be followed by a strong drop in subwave -c- down:
To trigger the short “failed breakout” setup bears need to push NQ back under resistance 11,431.
Then a drop to the Green Box 11,213 – 11,113 would be a gift from trading gods, an attractive long trading setup to ride a crazy strong 1,200 point short squeeze rally targeting 12,400+.