QQQ Could Spell New Low For Nasdaq
NEW YORK (Dow Jones)--The QQQ may be signaling a new low for the Nasdaq Composite Index, according to two technical analysts.
The Triple Q, or Nasdaq 100 trust, is showing the kind of weakness that could take it to a new low in the mid-40s, surpassing its Jan. 3 low of 52.25, said Arthur Hill, chief technical analyst at StockCharts.com, a Web site devoted to technical analysis.
The correlating fall for the Nasdaq Composite Index would be to 2000 or even 1900, taking out its closing low of 2291.86 on Jan. 2, said Hill, who has been practicing technical analysis for over 10 years. The Nasdaq closed Monday at 2643.21.
The Triple Q, which trades on the American Stock Exchange and is often one of its most active issues, is a way of playing the Nasdaq 100 - the index's biggest non-financial stocks.
The tech-heavy Triple Q's weakness is apparent when looking at both short-term and long-term charts, Hill said.
The trust's 30-minute intraday chart shows a rising wedge pattern that technicians said can be dangerous. The configuration shows a sharp decline, then rapid gains - but the advances do not exceed high points the index has previously posted. Not only does that mean the Triple Q isn't showing legs for a sustained advance, but it is in position to fall back, Hill said. "The path of least resistance points down."
At the same time, the trust has been unable to break out of a trend line that has been in place since early September. The Triple Q, which closed Monday at 61, has to stay above 67 for a time if it is going to convincingly break that line, Hill said.
Some investors may be looking to Cisco Systems Inc. (CSCO), which reports after Tuesday's market close, to provide a boost for the Triple Q.
Hill doesn't hold out much hope. Cisco was weakening while the Nasdaq was advancing; it seems unlikely Cisco will suddenly start strengthening while the Nasdaq is in a downward mode, he said.
At its Monday close of $34.56, Cisco trades well below its 50-day moving average of $43.02 and its 200-day moving average of $56.54 - meaning its closes have been successively lower.
With that kind of weakness, even an initial spurt after the company reports may not be sustainable, Hill said.
Richard Suttmeier, chief technical analyst at Joseph Stevens, said the Triple Q broke a key support point of 65 on Friday when it closed at 61.55, down 3.60.
A fall through 60 could spark a downswing to 54. That's where the Triple Q would next hit support, a price where buyers are finally expected to exceed sellers, allowing the stock to at least stop falling.
A drop to 54 or 53 would correlate to the Nasdaq Composite trading at 2350 to 2300, near its existing low.
But that may not be the bottom, Suttmeier said. "It's very possible you can go to new lows."
It may be too soon to tell if the Triple Q and the Nasdaq are headed to new nadirs, but their performance is troubling, said Gary Kaltbaum, technical analyst at First Union Securities.
The Nasdaq gained 12% in January after losing 39.29% last year. Peeling apart January's rise shows a few powerhouses accounted for much of the advance - the gain was not the kind of broad-based move that points to market strength.
Five stocks, all members of the QQQ, accounted for 50% of the Nasdaq Composite's rise. Looked at another way, just one-tenth of one percent of the index's 5,000 stocks were responsible for half of its move.
Microsoft Corp. (MSFT) accounted for 25% of the Nasdaq's gain. Microsoft and Intel (INTC) accounted for 33% of the move. And 50% of the advance was attributable to Microsoft, Intel, Dell Computer Corp. (DELL), WorldCom Inc. (WCOM) and JDS Uniphase Corp. (JDSU).
"That tells me if these five guys get in trouble, it doesn't bode well for the Nasdaq," Kaltbaum said.
But Kaltbaum doesn't see the same kind of "open up and swallow" that happened to Nasdaq stocks last year.
This time "the Fed is on our side," and a lot of earnings disappointments are already factored into stock prices, he said.
No matter how far the Nasdaq slips, it should still end up for the year perhaps at 3300 or 3500, said Richard McCabe, chief technical analyst with Merrill Lynch.
But fasten your seat belts, said McCabe, who sees the pattern for the year being saw-toothed, with periods of selling after bouts of buying.
02/06/2001
Dow Jones News Services
(Copyright © 2001 Dow Jones & Company, Inc.) |
