Nasdaq leading the charge – down?

On Wednesday, my post was “Nasdaq leads the charge” – and I was referring to the five-year old rally.  I had a firm tramline target in place and the market was heading for that level.

While I was away at the London Money Show, my target was hit – on the nose in what appears to be the final thrust:

Isn’t that pretty?

I can certainly count five waves up here and if that is correct, we are there!

Let’s zoom in:

This is the last leg up on the hourly chart and again, I can count five clear waves up to the 3400 high.  And with the huge neg mom div, this is enough to call the rally over (or nearly so).

Then, last Thursday, the market sold off and then rallied on Friday.  This is telling.

Friday’s strong close going into the Veteran’s Day weekend was a sure sign of a desperation to load up on stocks in the face of possible market-moving news out of China, where economic policy is currently being decided for the next five year plan, or some such.  I expect this event will serve to increase volatility, since China is at a crossroads with its massive debt pile with much of it of poor quality.

So, when China sneezes, we all catch Asian flu.

To my eyes, this has all the hallmarks of exhaustion buying coming at the end of the five-year relief rally (off the 2000 Real Dow high).

Coming off my Tramline target at 3400, I can count waves 1 and 2 down.  If so, we should be at the start of a third wave down.

Since third waves are long and strong, I shall know soon enough.

In my Weekly Wrap, I showed a clear five down in the Dow, so the Dow is leading this time.  But with bullish sentiment towards tech stocks at Dotcom mania levels, when the market cracks, it will be brutal (for the bulls, that is).

So wouldn’t that be ironic – we dodged the October crash, which most were counting on.  Will we miss the Santa Rally, also a much-anticipated event?  Remember, markets exist to disappoint the many.