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

To: Vendit™ who wrote (6405)	3/14/2005 6:44:33 AM
From: Walkingshadow	Respond to of 8752

Hi Reid, Nice analysis as usual. A few things I think might help QQQQ move lower: 1. The $SOX, which appears determined to test the lower regression channel rail, which currently sits at 400 but will rise somewhat with time to maybe 410 by the time the $SOX can get down that far (that would be a 4% drop from current levels): 139.142.147.218 I am not optimistic that first support level will hold; I think the $SOX is headed for harder times. 2. Oil. Light sweet crude futures are not correcting as much as I thought. Instead, they are consolidating above the former highs. As I write this, oil is trading up on the session somewhat, and gives little indication of any intent to correct any further, despite the OPEC meeting in a few days. I don't think OPEC will have any effect... they already admit that members have increased production because of the attractive prices, and they implicity condone that because it will tend to stabilize the markets. But members are producing at very near peak capacity, and cannot significantly increase production any further. Sooner or later the markets will notice this, and inflation worries will put a damper on the market. The FOMC has already begun preliminary psychological preparations for what I believe will be stronger statements and possibly action later: futuresource.com 3. The dollar: after the record January trade deficit was announced, the dollar has come under renewed pressure. Now it looks like it might pause a bit or rally into the middle of the BBs, but does not look healthy, and seems headed for new low ground: futuresource.com Index futures are trading about flat right now. After Friday's overdone selling, I think we'll see a bit of rally at some point this week, but it won't be strong. The first support you mention at $36.76 will be tested, as you say. I think there's a fair chance that will hold, and a brief rally will then ensue, followed by more downside. Volume patterns from last week suggest this is most likely. Short-term market internals all suggest more downside is first on the agenda, with the exception of the NYSE $TICK, which inexplicably is rising (Nasdaq TICK is dropping). 139.142.147.218 So the scenario I think most likely for next week is continued selling down to $36.76 as you say, but I think it is likely this level will hold temporarily. Next, a brief and ill-fated relief rally later in the week, with selling resuming either very late in the week or early next week. The lower regression channel rail (about $36.40) will probably not be reached this week, but will be tested soon, probably the following week. At that point, the lower BB rail will be blown open, and the extreme contraction relieved. Also, the 200 sma will be breached to the downside: stockcharts.com[w,a]daclyyay[dc][pd20,2!b200][vc60][iLyb20,2.0]&pref=G The $36.40 support level will then fail to stop QQQQ's march downwards, and the lower regression channel rail from the long-term QQQQ uptrend will be within reach. I make that level to be about $35.50, perhaps a bit less: 139.142.147.218 That lower regression channel rail from the 3 year chart is the beginning of the reversal area, and could be broken briefly (i.e., intraweek). But it will ultimately hold, and the long-term uptrend that is clearly apparent on the above 3 year chart will remain intact. Trying to extrapolate forward, as best I can tell this will take 4 to 8 weeks to play itself out. T

To: Vendit™ who wrote (6405)	3/14/2005 7:05:31 AM
From: Walkingshadow	Read Replies (1) \| Respond to of 8752

More on the $SOX.... Reid was kind enough to upload the chart linked below: Long-term trend is up, following a V bottom in late 2002. Within that trend is a long-term downtrend that began in January 2004. Within that trend is a shorter-term uptrend that began in September 2004. This will get tested soon, as the $SOX trades down to the lower regression channel rail (red line). themarketwind.com There, it will fail. Next target will be long-term chart support at just above 350. That will probably fail temporarily, and the $SOX will briefly test the very long term lower regression channel rail (blue line in above chart). Probably by the time this happens, the blue line and the lower chart support will be very close, because the regression channel is rising, but obviously chart support is static. So I consider the blue arrow in the above chart to be the most likely reversal point, which would be chart support, but also lower regression channel rail support. Note that the $SOX is not absolutely required for the Nasdaq to advance. You can see this from the chart below, which is the ratio of the $SOX to QQQQ. stockcharts.com[w,a]waclyyay[df][p][vc60]&pref=G But you can also see from this chart that when the $SOX is not participating in the general market rally, the index cannot advance nearly as strongly. So... in this chart, QQQQ's rally after the $SOX headed south was much more subdued, and eventually stopped in its tracks, and a correction started that we are currently in the midst of. Based on these things, I think it likely that QQQQ will emerge from the medium term downtrend at a time when the $SOX is still correcting. QQQQ will proceed upwards, but not sharply. It will work its way along with some effort for a few months, but when the $SOX reverses, then QQQQ will trend strongly upwards. T