Today's candle was pretty bearish, as you know, and all indicators are now showing sell.
139.142.147.218
There was also a sell signal in the put/call last week, but this tends to be a leading indicator. Volatilities are rallying strongly:
stockcharts.com[w,a]daclyyay[db][pb10!b20][vc60][iLp14,3,3!Lp14,3,5]&pref=G
stockcharts.com[w,a]daclyyay[dc][pb10!b20][vc60][iLp14,3,3!Lp14,3,5]&pref=G
The 10 day moving average of the Nasdaq TICK has been steadily dropping over the last month or so, and this also tends to be a leading indicator, as you can see by comparing it with the trends in the technicals and then price:
stockcharts.com[w,a]dallyyay[db][pc10][vc60]&pref=G
Volume patterns indicate there is resistive volume that has accumulated, and that needs to be worked off. We won't see QQQQ rally with any conviction until we see it trade down some, then meet a surge of supportive volume. But, where might that happen?
I think it is a foregone conclusion that QQQQ will trade down to the lower BB rail. Notice also that the BBs are EXTREMELY contracted (1.02). In fact, they have not been this contracted at any point in the last 3 years at least:
stockcharts.com[w,a]daclyyay[dc][pb50!d20,2][vc60][iLp14,3,3!Lyb20,2.0]&pref=G
This extreme contraction is unstable, and must be resolved. The only way to resolve it is for QQQQ to push hard on one rail or the other. It will not push up on the upper rail; the technicals and chart and internals tell us that. So, that means it will push down on the lower rail. So, because of this, together with the deteriorating technical and internal picture, I think QQQQ will push down on the lower BB rail, and test support at the 50 ema, which I put at about $38.60. There is some chart support in this region from November. I think it is possible this will not hold, but it is too soon to tell. There was solid volume support below that, at about $37.90, so QQQQ may have to dip down that far to find similar volume to fuel a continuation of the long-term uptrend. We'll just have to watch the volume patterns to see where buyers come out of the woodwork, but that level is a likely spot.
So the short answer is I will look to cover around $38.60, but if QQQQ seems to gain downward momentum and doesn't find a surge in volume, I might hold the position. We'll just have to see how it reacts at that level. If there is a big surge of volume, I'll likely cover there.
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