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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: Vendit™ who wrote (3986)	1/18/2005 11:09:08 PM
From: Walkingshadow	Read Replies (2) \| Respond to of 8752

Reid, this seems entirely consistent with what we have been anticipating and posting about here: a short-term and unconvincing rally, followed by a medium-term correction. Here's some of the links as we posted back and forth: Message 20952585 Message 20933006 Message 20930956 Message 20952254 Message 20954257 If you look at the charts, most have volume-heavy black candles looming above. I think it is very unlikely that the indices will overcome that resistance during this current rally. In the case of QQQQ for example: 139.142.147.218 The biggest weekly volume in the last 6 months was the last black candlestick in December. I think QQQ will advance no further than halfway up that candlestick. This would be about $39.35, and is also an area of chart support that was broken by that single black candlestick. Note also that even on the weekly chart there is evidence of bearish divergence.... the last two highest peaks in OBV for example. The second peak is less than the first, despite price reaching the same high ($40). At the same time there was a dropoff in stochastics and relative strength as well. In my view, together these strongly support the interpretation that QQQQ will fail at the test of overhead resistance exerted by that black "power candlestick." Furthermore, you can see from the weekly chart above one of the reasons why I thought there would be a short-term rally: last week's candle sits in the middle of the regression channel, bounced of the 20 ema, and is a reversal candle. If you switch to BBs, you see basically the same thing, maybe even more obvious. Furthermore, if you switch to a weekly 2-year chart, you can see that QQQQ bounced off a region of long-term chart support that QQQQ advanced through rather convincingly in November. The daily chart shows this even more dramatically, and it shows something else very clearly: bearish divergence across the board in the technical indicators that began in November: 139.142.147.218 Now QQQQ is coming off oversold extremes, and is neither oversold nor overbought. It traded relatively low volume today, and volume has been gradually drifting down since that big-volume bearish candlestick (and the previous one with less volume) that began the year. QQQQ is now approaching the midline of the BBs, where it will begin to encounter resistance. That resistance will only get stronger as it burrows deeper into the region dominated by that bearish candlestick on the weekly chart. There, IMHO, QQQQ will turn and begin its mid-term correction. The only difference between your interpretation and mine that I linked above is that I had been emphasizing that I thought there was one more last-gasp rally left in QQQQ before the correction began. I think you might have underemphasized that, but I think you saw it just the same. And, the rally in the $OIX was anticipated by you also. So.... things seem pretty much on track to me. I am currently long QQQQ, but I am looking to flip short very soon, probably by the end of the week. The thing about oil will only provide more fuel for a medium-term correction. I posted last night that although oil futures were rallying, they appeared ready to begin a short-term correction after successfully testing resistance and driving to the top of the BBs. futuresource.com Message 20958904 I think this correction will be orderly and short, and followed by continuation of the uptrend. This sequence of events should dovetail pretty nicely with the sequence of events we anticipate for QQQQ: short-term unconvincing uptrend to resistance (and likely overbought status), followed by a clear medium term correction to the support levels we outlined previously. Another view would be that the mid-term correction really began in mid-December, and we are in the middle of a relief rally within that medium-term correction. I think this interpretation is not really at odds with the above, they are both saying essentially the same thing, just in a bit different ways. Let me know what you think, but personally things seem reasonable to me right now. T