The Fast Top Scenario at Friday’s Open – Didn’t Play Out Because QQQ Bogged Down
The chart above is the fast top scenario from Friday’s open. If PowerShares QQQ Trust Series 1 (NASDAQ:QQQ) hadn’t bogged down at 144 for the last four hours of the trading day, QQQ would likely be crashing now.
QQQ’s Stall on Friday Means It is Unable to Complete a H&S Top Here Inside the Blue Rising Megaphone
Instead, QQQ’s stall on Friday means it can’t complete a head and shoulders top here inside the blue rising megaphone. It could still complete a H&S top across the blue rising megaphone bottom (pink scenario), but that scenario is so rare I used to think it didn’t exist.
Friday’s stall means QQQ is a strong favorite to put in a higher high outside the blue rising megaphone if it breaks out of the megaphone here (purple scenario). Otherwise, QQQ should continue melting up the blue rising megaphone, typically forming a rising wedge or rising megaphone extension, until it forms a H&S somewhere near the top of the red megaphone.
But if anything can trigger the rare pink scenario, it would be something like a surprise FOMC announcement, so you can’t get too smug about long positions.
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