Where to expect the market to stop falling, and why.
In case you have been living under a rock lately, the markets have tanked. Since you're reading this now, I am assuming we don't have many rock-dwellers here. Anyhow, this recent tantrum by Mr. Market probably has quite a few people guessing where to expect the slide to stop. Well, I present to you the power of Pivot Points! This is a wonderful feature here on Tradingview and it helps predict the otherwise invisible support and resistance lines where the mathematically driven algorithms that power 70+% of volume tend to stop selling or buying.
Here we have a logarithmic scale of QQQ all the way back to the biggest crash in most of our lifetimes - 2000. In order to do that I have used monthly bars and the Yearly pivot points. For purposes of clarity I have only kept the Pivot Point (P), Support level 1 (S1), and Resistance level 1 R1) on the chart. You can enable as many support/resistance levels as you wish, but most of the time the ones to be concerned with are S1 and R1. S2/R2 are useful at times, and anything beyond that (S3/R3, etc) is usually a news induced spike and those spikes don't necessarily adhere to any rules whatsoever.
The black arrows indicate areas where the price action made a relatively clean touch and retracement from either the S1 or R1 lines. The Pivot Point itself can also act as a powerful support OR resistance point, but I had to draw a limit on the number of arrows for the sake of clarity. The blue arrows are pretty self explanatory, and the one at the 2008 crash shows that these calculated lines don't always work and the market CAN crash right through them. That being said, nothing always works.
As a side note, notice how when the market does successfully breach the R1 line how it routinely results in a powerful retracement much of the time. Keep in mind these are MONTHLY bars, so even a 2 bar retracement can feel like an awfully long period of time in the real world.
So what does this all mean? It means that we should look for QQQ to stop hemorrhaging around $330. That's another 6% or so down from where we are now. If we dip significantly below that line, then reference another post of mine drawing a potential head and shoulders and/or double top. This scenario has QQQ calculated as going all the way down to $291.
Here we have a logarithmic scale of QQQ all the way back to the biggest crash in most of our lifetimes - 2000. In order to do that I have used monthly bars and the Yearly pivot points. For purposes of clarity I have only kept the Pivot Point (P), Support level 1 (S1), and Resistance level 1 R1) on the chart. You can enable as many support/resistance levels as you wish, but most of the time the ones to be concerned with are S1 and R1. S2/R2 are useful at times, and anything beyond that (S3/R3, etc) is usually a news induced spike and those spikes don't necessarily adhere to any rules whatsoever.
The black arrows indicate areas where the price action made a relatively clean touch and retracement from either the S1 or R1 lines. The Pivot Point itself can also act as a powerful support OR resistance point, but I had to draw a limit on the number of arrows for the sake of clarity. The blue arrows are pretty self explanatory, and the one at the 2008 crash shows that these calculated lines don't always work and the market CAN crash right through them. That being said, nothing always works.
As a side note, notice how when the market does successfully breach the R1 line how it routinely results in a powerful retracement much of the time. Keep in mind these are MONTHLY bars, so even a 2 bar retracement can feel like an awfully long period of time in the real world.
So what does this all mean? It means that we should look for QQQ to stop hemorrhaging around $330. That's another 6% or so down from where we are now. If we dip significantly below that line, then reference another post of mine drawing a potential head and shoulders and/or double top. This scenario has QQQ calculated as going all the way down to $291.