On Thursday, I wrote that I was surprised at the rally. I also wrote that to be believed, there had to be followthrough. On Friday, when the unemployment report hit, the futures dove back down to support. The Nasdaq bounced at 2517 off of the top trendline on the 60-minute chart. You had to be fast though, because within the hour, the index was back at the support.

I’m going to include this post and chart in the “trading patterns” category because it’s important. If an index or a stock immediately breaks below a breakout area it just cleared; get out of that equity. Failed breakouts catch more people off guard after a previous day’s strong rally. It’s easy to get that deer in the headlights reaction. You do nothing, and watch your profits go up in smoke. It was darn hard to be a short on Thursday. I know, because I added my 3rd position of QID near 2550. I planned the trade. My gut said the move wasn’t real. I hardly ever do that, but I’ve been on the other side of this trade before, and know the games that can be played. Am I always right? No. But you have to bend the rules sometimes.

Now that the breakout has failed, I’m gonna go with my gut again, and say this market sees Nasdaq 2350 before 2550. I believe the bears really took control here Friday. We’ll see if there’s any bounce at all, and how strong.

The monthly Nasdaq chart has retraced more than 50% of the Oct-March decline. We’re heading into a historically slower time of year. A dip down to 2350 to refuel, could recharge this market in preparation of a strong Fall rally. We’ll watch and see.

The VIX woke up on Friday. 26 was the inverse head and shoulder target. We made up ground towards that number fast on Friday.

The 60-minute chart of QLD shows a general rule of thumb I follow. Triple tops and bottoms are generally going to fail. In this case, the bulls just couldn’t be held down. After the double top, they made another run at the high. The bears couldn’t hold them down. The trend is up on the daily chart. That 4th push should follow through, and did. Also note the double bottom, which is followed by two higher lows. It sounds simple, but it does usually work.