Investors Are Seeing Purple Rain

Given market activity of the last ten days, I thought it the right time to update the NASDAQ Market Structure post. On August 5th, I identified the real near-term possibility of a pattern structure in the NASDAQ similar to that seen in 1998. That year, the macroeconomic context was contextually similar, with sovereign debt issues + currency turmoil + oil market volatility. In 1998, the NASDAQ made a key high on July 21 and progressed downward from there. At this point, it is clear that the NASDAQ has made an important high on July 20th this year. With the violent price action of the last three days, this assessment has proven correct. At this juncture, I expect pattern similarity to continue. This expectation suggests that the substantial downdraft underway would continue into next week, with the possibility of meaningful volatility across all markets and after that likely substantial 2-way price action in the NASDAQ and related equity markets. That is, price action will likely find another ‘attractor’ and oscillate, as does a pendulum once disturbed, to reorganize into another level of order. It’s 1998 all over again.

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Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the author only. There can be no assurance that developments will transpire as forecasted and actual results will be different. Accuracy of data is not guaranteed but represents the author’s best judgment and can be derived from a variety of sources. The information is subject to change at any time without notice.