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Strategies & Market Trends : Playing the QQQQ with Terry and friends. -- Ignore unavailable to you. Want to Upgrade?

To: IHateSourCream who wrote (473)	5/31/2005 6:17:13 PM
From: Walkingshadow	Read Replies (2) \| Respond to of 4814

Hi IHSC, Yes, you are right: there was indeed a spike in volume at around 11am in QQQQ, and it can be seen in the AskResearch 5 min intraday chart: 139.142.147.22 And you are also correct about the other volume surge that occurred before that at 10 am with similar significance. Both spikes were at low points in the market, and both therefore indicate some accumulation. But market direction is a function of net buying and selling pressure within the context of a specific time frame. So, the question then becomes: how does the magnitude of this accumulation that you pointed out fit into the overall scheme of volume patterns? Is there more accumulation, or more distribution in the short-term? This is much harder to appreciate on the AskResearch charts, but after 11am all we saw was spikes in volume as the market made intraday peaks. The magnitude of THIS volume far surpassed the prior spikes, so by the end of the day there was a surplus of distribution volume, which has the effect of acting as resistance, and exerts downward pressure on price. The longer the delay in reaction to this, the greater the strength of the subsequent reaction, in general. The biggest one occurred just after 2:30pm; I know it looks like the one just after 11am is bigger, but I use charts that show the moving average of the volume. With a 15 min moving average of volume on a 1 min intraday chart, the background noise is filtered out, and you get a nice distribution of peaks. You can see the same thing with a longer moving average (30 min), but shorter moving averages get increasingly noisy. Using moving averages of volume, the spike after 2:30pm is larger than both the 10am and 11am spikes combined. There were a series of similar spikes in the afternoon as the market was moving upwards, but these are not nearly as big as the one at 2:30pm. Net for the day then, there was additional distribution volume today. This was not huge, but it was significant. Anyhow, this pool of volume now gets added to the existing pool, which similarly gives an excess of short-term distribution volume that has accumulated since the middle of May, and the market has not yet reacted to it. I remain convinced that this will happen; the question is not if, the question is when. I thought that would be last week, but I was wrong. Now today the markets are down, suggesting that this process has indeed begun (FINALLY !!!!!!----I am underwater on a short position in QQQQ !!!!). Now... I am talking short-term or medium-term here, the long-term trend is unaffected by this, because it is driven by far more powerful accumulation forces that will continue to be processed through the end of the year, and become manifest as an uptrend in the long-term frame. That is very clear, and can be seen in this regression channel chart (which does not show the volume pools very well at all, except for the volume surge at the bottom in July/August 2004): 139.142.147.218 Note that the $SOX still looks technically strong, but there is critical overhead looming at $445: 139.142.147.218 What happens there will determine the strength of the trend for the rest of the year in QQQQ. Personally, I think the $SOX will pull back a bit here, gather itself up, then attack that overhead, and very likely succeed on the first attempt. The key will be how long it spends gathering its forces right now. If the pullback is only modest or minimal, it will not likely have enough momentum to break through that overhead. The longer the pullback/consolidation lasts, the greater the likelihood that this critical barrier will be taken out on the first try. T