Yes, I agree.
As anticipated, the BBs were blown open to the downside after the acute contraction about 2 weeks ago, and moved sharply down to successfully test the long-term support levels predicted several months ago, developing higher volume and more favorable volume patterns all along the way. Now, after a bit of congestion at the bottom early last week at solid support from multiple sources, QQQQ has lifted off and away from the lower BB rails.
stockcharts.com[w,a]daclyyay[dc][pd20,2!b200][vc60][iLg!Lp14,3,3]&pref=G
First resistance will be the middle of the BBs (declining 20 sma), which currently sits at $36 but will drop a bit before QQQQ can make it up there.
I think there's a 50/50 chance QQQQ will get turned back there, and revisit the bottom briefly. Although there are very definite encouraging signs in the volume patterns, I don't think we're quite there yet. So a sustained rally in QQQQ will likely require a few failed tests of overhead, followed by a drop to support to pick up more volume pressure. The first of these series actually occurred Thursday and Friday at the initial resistance defined by the gap down and volume-heavy overhead candle from a week previous. That level will fall this time as QQQQ probes the next level up (about $36).
Any way you slice the regression channels, the conclusion is the same: we are testing support from the lower BB rail. This is true regardless of the time frame.
Here's the weekly 3 year chart showing the long-term trend (133 week regression channel):
139.142.147.218
Here's the same chart showing the "medium-long" term trend (66 week regression channel):
And here's the same chart again, showing the medium-term correction with a 20 week regression channel:
139.142.147.218
QQQQ is quite oversold, but there are no technical buy signals quite yet:
139.142.147.218
If you set the stochastic at the faster 5-3-3 setting, a crossover from extreme oversold territory occurred a few days ago:
139.142.147.218
Market Internals:
There was a crossover of the 20ema/50sma of the put/call that began just before the beginning of the current correction, but although these moving averages are still rising, the put/call looks to be subsiding now after having reached extreme bearish levels a week ago:
stockcharts.com[w,a]daclyyay[dc][pb50!c20][vc60]&pref=G
The volatilities are all sitting on support, and suggest more upside, but there are no clear indications to me which way volatility may trend in the short term. I think it is a coin-toss there. The NYSE TICK is moving down, but the Nasdaq TICK is moving up. So the market internals are showing a mixed picture, with no clear indications one way or another. I'd say there is a modest bias towards the upside, but the internals hint that first we'll see a bit of downside early in Monday's session.
So my projection is a test of overhead at the middle of the BBs/20 sma (at about $36). That test has a 50/50 chance of failure IMHO, and if so QQQQ will revisit support levels successfully tested last week; that support will hold, and we'll see another run at $36, which will be successful if volume patterns develop favorably (likely; we are getting closer there). I don't expect the lows of last week to be tested, rather the lows from Friday's session will hold ($34.70).
All in all, we have put in a bottom, and most likely we will see the reverse of the pattern we have seen during the correction. That patten has consisted of repeated tests of resistance followed by failure at support and a drop down into a brief sideways trading range, then repeat the process, stair-stepping down. Now, we will see "stair-stepping" up over the next few months.
The thing that will change that and cause a sustained, strong uptrend is extend of the participation of the semiconductors. That is a distinct possibility, as you can see from the the charts of the $SOX, particularly the weekly chart:
139.142.147.218
139.142.147.218
If the semis rally strongly, then so too will QQQQ. If the semis drift or chop around, then QQQQ will revert to the "stair-step" pattern and rise only gradually.
T |
