Consistency is the name of the game - Thomas Ng memo 27 Jun 2023
On Tues 27 Jun 2023 11pm, I emailed Clients my latest post titled 'Consistency is the name of the game.'
Below is the full transcript for your perusal:
Apologies for the delay, just got back from a family holiday and I'm extremely happy to see how Mr Market(s) has obliged my bullish script detailed from months back, again!
Let's dive straight into it: . 1. Bitcoin (aka BTC):
On 5 Apr 2023, I said: The Inverse Head & Shoulders formation as shown is a typical bullish bottoming pattern. Once price action breaks out of its neckline at ~25,000, the pattern implied target is at 34,566+/-. A backtest (or pullback to the neckline) is still possible.
Reference to my memo https://tinyurl.com/showmethechart .
The Bitcoin pullback in Jun 2023 stops exactly at the said neckline before kicking off the current 27% rally. See Chart 1 below dated 25 Jun 2023.
Chart 1 - Bitcoin (BTC) Daily, 2-yr
Beautiful textbook re-test back to breakout level before the new rally kickstarts
2. Nasdaq 100 Index (or QQQ ETF):
On 12 May 2023, I said:
In conclusion, from my SPX Chart, I'm sticking with my original technical view that the 61.8% - 78.6% retracement level remains a strong price magnet for both SPX & Nasdaq in the short to medium term.
Reference to my memo https://tinyurl.com/mostanticipatedrecession
See Chart 2 below dated 25 Jun 2023 - QQQ ETF hit an intra-day high right smack at the 78.6% retracement level at 372 on 16 Jun 2023 before doing the current pullback. I rest my case.
Chart 2 - QQQ ETF Daily, 1-yr
Note how price action gets turn down first at every pattern-implied targets (horizontal black arrows corresponding to each pattern-implied target), before resuming its uptrend
3. S&P500 Index (aka SPX):
On 5 Feb 2023, I said:
If we see a sustained breakout roughly above the 4105 level, then we should look forward to a bullish (purple) Cup & Handle Pattern implied target of 4440+/-.
Reference to my memo https://tinyurl.com/riskison
See Chart 3 below dated 25 Jun 2023 - SPX hit an intra-day high at 4448 on 16 Jun 2023, 8 points away from my 4440 target, before doing the current pullback. Well then, I rest my case, twice!
Chart 3 - S&P500 Index (SPX) Daily, 2-yr
As mentioned before, the above green retracement zone is a natural price magnet
Some of those friends & clients who follow my work closely over the years have often asked me how I was able to decipher many of the major targets or turning points in asset prices.
My answer is pretty simple. You see, Mr Market actually does not give a hoot about what you & i think and he will do what he wants to do. In other words, I can get it totally wrong.
However many a times, some of the movements or patterns (well, not all of them) in major indices can be pretty textbook stuff. For that matter, even deviation from textbook price action is often a strong signal by itself.
Ultimately, it is a probability game and the beauty of it is that as a trader or investor you already see from the Chart the differing potentials that may play out and be ready to act as each potential unfolds for you or against you.
Consistency in choosing the right side of that potential is thus key to the game.
Further, I've said before that price action is only on a 2D chart and chart patterns keep repeating itself throughout history simply because price action has always been governed by two basic human capitalistic traits - greed & fear. Til the day price action becomes multi-dimensional, life for me as a 'Chart Whisperer' may then truly get more complicated!
So what's next?
Given the current major move off the March lows (SPX up ~17%), I'm hesitant to continue to chase it. . In conjunction with the Stock Market Negative Seasonality (Sep & Oct being the worst performing calendar months for SPX) and traditional chart indicators are again showing negative divergence, we should be on the lookout for a more sizable pullback. . For Clients who wish to have an idea where the next high probability pullback zone may be, pls drop me a line to pick my brain. . Now, while I've said above that the risk reward at this point in time in the market is no longer sweet, I do have to bring to your notice that there is indeed another bullish Cup & Handle pattern nested between early Feb to mid May 2023 (see orange box in Chart 4 below dated 25 Jun 2023).
The pattern-implied target from this 2nd Cup & Handle breakout is at 4533 which coincides exactly at the 78.6% retracement level.
Interesting confluence of the same target level, wouldn't you agree?
Thus if I could truly have it my way, I would like to see the current rally continuing or whipsawing into the late Aug - Sep months towards the said 78.6% retracement target level (ie SPX 4533) before seeing that sizable pullback we so often see in Sep and/or Oct of every year!
Let's watch this space!
Chart 4 - S&P500 Index (SPX) Daily, 2-yr
Will Mr Market tease us with one more high (OMH) before a more sizeable pullback?
Live Long & Trade Well.
Thank you & regards
Thomas Ng, CMT
Principal Trading Representative 首席股票经纪 www.thom-ng.com
Image source: www.actioncoach.com/blog/what-does-consistency-mean-in-the-workplace'