Here is the long-term chart of QQQQ, with some regression channels drawn in. These regression channels can be very useful, by the way.....in 2005, I used an analysis exactly like this to correctly predict within a few days or so the bottom of a medium-term correction. Not blowing my own horn here really, since I have been very wrong about things before, just want to suggest that this kind of analysis cannot easily be dismissed.
The good news is that the top of the regression channels has been defined. So we will know that as the index approaches $55.00 again (probably at least a year from now, if not several years), we should be strongly considering moving to cash and/or going short.
The absolute lower limits of the index are where the medium-term regression channel (in red) collides with the long-term regression channel (in blue). So the absolute bottom is at about $20.00.
Will it get down that low?
That is not at all unthinkable to me. However, the midline of the red regression channel is also support, and that could be the final bottom as well. If that occurs, then we are looking at a bottom somewhere between $20 and $25, depending on how long the index pulls back.
The slope of the red regression channel is about -$1.17 per month. If the index trades down until the end of September, then the midline will be pretty close to $25.
But if the index cannot find support at the midline of that regression channel, we are looking at a final bottom close to $20. I think that is the most likely scenario.
One thing for sure, as the index descends below $25, then we should be gathering all the dry powder we possibly can, and increasingly consider throwing everything into the market.
 |
