Nearing a Bottom, But What Kind?

We continue to analyze the QQQQ, as it has been the leader on the rally up, and now leads the market down. When it finds support and reverses, it is very likely that the rest of the market will take its lead. Note that the QQQQ has a large open gap up to $41.43 and then a very small open gap up near $43. The large open gap represents a break of the neckline on a head and shoulders pattern and likewise, a break below pivot support. This break indicates that there will be no real support until the price touches down or moves just below $40. One of two things can happen here. Scenario 1: The market will bounce and the QQQQ will move up in a weak thrust to close the open gap above $41. This would be bad for the bulls and we would look to short the bounce under this scenario. Scenario 2: The QQQQ continues to bleed here and refuses to bounce even though it is getting oversold. The price would then stretch down to or just below $40 over the next few days. This would be great for the bulls and would lead to an excellent buying opportunity for what would surely be a strong rally, perhaps back up to or even above January's highs. For now we hope for Scenario 2 to play out, but will prepare for Scenario 1 just in case.