Hi Gush,
Well, here's what happened.
QQQQ rallied early in the session above the first two levels of resistance, chart resistance at $36.00 and the 50 sma at $36.17. Next test was the upper BB rail at $36.21. QQQQ came within $0.01 of that, but reversed and spent most of the afternoon trading down, until the last half hour:
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During the afternoon, QQQQ traded back down through the above-mentioned resistance levels.
Technical/momentum indicators show sell signals in OBV and Williams. However, these are early indicators, and confirmation from a stochastic crossover has not yet occurred, although it appears imminent:
139.142.147.218
So far, the picture looks pretty bearish for the very short term (1 - 3 days). We may very well see more downside here, in fact I suspect the early part of tomorrow's session (at least; see below) will be just that way. But there are silver linings in these dark clouds.
First, notice on the daily charts above that there are now six consecutive candles with significant shadows below the real body. Only one of these (today's) has any significant shadow above the real body. This tells me that the bulls are still in control, because when the bears push QQQQ down, they cannot keep it down, and this happened six times in a row.
Second, look at the downward trendline formed across the peaks of the OBV and stochastics. This trendline has been broken to the upside, which tells me that there is a fundamental change in momentum now. This is a manifestation of the reversal of the medium-term correction, which has clearly ended. That fact is evident from analysis of the long-term and medium term regression channels (but there is other evidence to support that conclusion as well):
Long term regression channel:
139.142.147.218
Medium-term regression channel:
139.142.147.218
QQQQ will now trade no lower than the lower rail of the long-term regression channel. You can see that this intersects the upper rail of the medium-term regression channel at roughly $35.20.
QQQQ must break above the upper rail of the medium term regression channel. I think there is no question this will occur; exactly when it occurs I cannot say, but it will be sometime between now and when QQQQ reaches that absolutely critical intersection noted above.
The weekly charts above now show a reversal candle at the upper rail of the medium-term regression channel. This again favors downside in the immediate future. But I believe this downside will be quite limited. There is little evidence to support that conclusion from the above charts, but there is a lot of evidence to support that from the volumes. Careful scrutiny of the volumes over long, medium, and short terms indicates that this market has very little overhead volume pressure left to process before moving up, and instead there is a growing "pool" of supportive volume that has built up and will drive a sustained rally that will last through the end of the year at least. This will begin shortly, at any time in fact. Can we get any clues from the market internals for the very immediate future?
Market Internals:
The index volatilities look to be clearly on the rise here, and rising volatility puts downward pressure on price:
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The CBOE put/call has not yet reached a bearish extreme, again consistent with more downside here:
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The TRINs are rising, and the TRIN moves inversely to price:
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The TICKs are falling, consistent with imminent downside movement in price:
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So on the whole, the market internals indicate pretty clearly and consistently that the immediate future of QQQQ is down.
My overall interpretation is that first we will see some downside here, but this will not last long and QQQQ will not dip down to test the bottom established 3 weeks ago below $35. Instead, it will reverse at no lower than $35, and likely at $35.40 or so. This downside may last less than a session, but could also be extended into Monday, possibly even Tuesday. I don't think it can last longer than that. It just depends how strong the move is; the stronger the move, the more quickly it will end.
After that, QQQQ will move up, and probably strongly. As I write this, the futures are trading up moderately compared to the cash market. So if this is maintained into the open, the scenario I see for tomorrow is a modest gap up, then selling over the morning session at least, possibly longer, with a strong reversal increasingly likely at any time thereafter.
So: In the very short term, we are looking at a bit of downside, then a reversal. Medium and long term, we have a very bullish outlook.
Once again: beg, borrow, steal every penny you can and throw it into this market on the long side. We will finish 2005 at least 20% higher than where we are now. For better of for worse, you heard it here first!
T |
