Nasdaq symmetry - Oct 5, 2011

I have been really tied up + travelling lately.. sorry for the lack of posts. To catch up where I left off with these Sep 25th posts here and here, the risk rally i felt coming turned out to be phase-2 of the 3 phase sell off. The plot above illustrates the Nasdaq100 as per the QQQ etf. The risk rally last posted corresponds to the BC length on the above chart. But as you can see, another nasty down leg developed which is CD on this plot. This now completes the 3-phase sell off from point A. Point D was a good hit that satisfied target calculations. Additionally, since point D low was formed, we have seen

1) a bullish engulfment pattern take place on the low day Oct 4th which suggests further upside potential
2) heavy volume take place suggesting a solid bottom. It was the heaviest up-day volume since the early August capitulation
3) a divergence took place in the VIX index - the SP500 took out the early August lows BUT the VIX did not take out its early August highs. Bullish divergence

These are all the things you want to see at lasting lows. But there is some nice symmetry developing in this QQQ chart as labelled above. Accordingly, QQQ will likely top out on the 3rd day of this rally, Thursday Oct 6th at point E, and then test the lows once again at point F. A light volume test of the lows will follow the symmetry and if it continues, next will be the run up to point G.

As I type this, news of Steve Jobs death is hitting the tape and the Nasdaq futures are a bit lower. Lets see how the markets digest this tomorrow. Also on the radar are central bank meetings where people expect the Bank of England to announce QE tomorrow and the ECB to cut by 50 bps tomorrow. We could have some fireworks. A top amidst all this news followed by a final low on about Oct 10 - 11 would be very familiar to those who traded the turns of Oct 2007 and Oct 2002.