Aug. 1 at 2:28 PM
$QUIK
The markets have been overbought with a short covering rally for days now.
I have heard estimates that a drop of 1,000 to 2,000 points is needed to flush out the excess bullishness.
The daily Nasdaq chart that I see calls BS to that.
The chart shows a Wave 3 peak at 21,457.
Standard Wave 4s go to 38.2% to 50% retracement of the Wave 3 move, but can easily go to 61.8%.
A 2,000 point adjustment would be 19,450, which would be only about 35%.
BUT, there are multiple gaps on the chart
On the complicated chart below, I have put a standard Fibonacci grid, along with white horizontal lines bracketing the gaps.
The top gap is barely filled with a 2,000 drop.
The lower gap is between 50% and 61.8%, well within the range of a standard Wave 4 correction.
If the first gap fills, the second one should fill too, to restore a healthy chart.
There is also a lightly traded area below the 2nd gap, that should be reinforced, and probably will, if the 2nd gap fills.
Good trading.
