Market Before The Open, Thursday 8 August
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Fakeout
by Alex King
Well, nobody believed the Bank of Japan when they said it's all going to be fine now, can you degenerates please stop wrecking everything. As is normal, when markets think they have central banks on the back foot, they just keep pushing. Now, markets are crowds and crowds are made up of people and people are deranged, as any fule kno. So what happens is the market pushes and pushes to get (say) the BOJ to relent and not raise rates further - the BOJ relents. Market pushes harder, presumably now in the quest to get the BOJ to roll back the existing rate hikes. The BOJ can't win this game. If they don't cut rates the market will commit further acts of self-harm in pursuit of forcing the BOJ to cut; if the BOJ did cut rates the market would hop in the bath and pull a live cable in with itself, because if the BOJ cut rates then - what do they know that we don't. And so on.
In the end, a directional move runs out because there are no more sellers (in a bear move) or no more buyers (in a bull move). So far this I think is the clearest picture of the last few days' correction. This is Nasdaq futures (NQ) in recent months.
Double-bottom tested the lows last seen on April 19, then put in a series of higher highs before the drop towards the close today. But for as long as NQ stays up and over those April 19 lows, this has bullish potential.
Let's zoom in and look at QQQ (I'm using the Nasdaq because that's where maximum suffering has been inflicted amongst the indices).
That is shaping up to be an excellent Wave (ii) low. QQQ has to find support in that box to be so.
All of this is just opinion, the market could plunge today or tomorrow; the important thing is to have some context for where it might move and how one might take advantage of such a move - and how to protect oneself if the market does the opposite to what we expect. The charts we publish here daily can be used to plan hedging, stop-losses, profit-taking orders, you name it.
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