Thursday March 14, 8:33 am Eastern Time
Forbes.com
The Nasdaq 100 Climbs The Wall
By Ben Berentson
The Nasdaq 100 Index is one of the most popular stocks on the market and far and away the most popular exchange-traded fund. It tracks the 100 largest and most active nonfinancial stocks traded on the Nasdaq. Top holdings include Microsoft (12%), Intel (6%), Qualcomm (5.5%) and Cisco Systems (4%). While the QQQ made a powerful run after the markets reopened on Sept. 21--jumping nearly 60% by early December--the ETF has lost 25% of its value since then. It now trades around $37, dipping after a brief March rally.
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P.Q. Wall , the eccentric technician behind the P.Q. Forecast, thinks that the Nasdaq 100 Index (AMEX:QQQ - news) are set to make an upward move. He sees a reverse head-and-shoulder pattern, with the first shoulder forming in April 2001, the head at the late September lows and the final shoulder just being completed with the recent rally. "When the QQQ exceeds 40, you will have confirmation of the bull market," according to Wall. "It should move into a serious uptrend which will last for months. This should carry it to a minimum of $60 and a maximum of $80."
Wall is known as a follower of cycles and he thinks that a new Kitchin cycle for the QQQ was begun with the late September lows. A Kitchin cycle lasts three to four years, generically taking the formation of one year of major gains, two years of minor gains, and one year of sharp losses. It has been observed historically for many commodities. Between 1871 and 1946 it occurred 22 times at intervals of roughly 41 months with almost uncanny regularity. Since then it has been less regular, frequently running more than 50 months. Wall identifies Kitchin bottoms (that last year of the cycle before a new one begins) in the market in 1974, 1978, 1982, 1987, 1990, 1994, 1998 and now in 2001. He thinks that the cycle for the QQQ could peak quite early--with one year of sharper gains followed by two or three years of decline.
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