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

To: Slagle who wrote (513)	6/1/2005 1:45:31 PM
From: Walkingshadow	Respond to of 4814

Hi Slagle, Points well taken. One could make a pretty good argument for just a buy-and-hold long position with at least a 6 month time horizon. There'll be pullbacks during that time to be sure, and I think we are overdue for one here. But QQQQ will end up the year higher than it is now. I think there have been some unusual and unsustainable forces that have conspired to keep interest rates down.... partly the dollar carry trade, partly the excessive demand for treasuries from China and Japan, and with respect to RE markets and relevant rates, some increasingly risky and disturbingly irresponsible policies by parts of the financial sector that could well prove their undoing and leave them with a ton of REO and bad debt on their books in a year or two. But for now, it is clear to me that the long-term uptrend in QQQQ is solid and not threatened. Moving into 2006, that may well change, and frankly I will not be one bit surprised to see the indexes trading at current levels or below for the next decade or more, even two decades. Worse, I suspect the time window for profiting on the short side should this scenario come to pass will be quite limited. If that happens, capital preservation will become increasingly challenging. The equities and fixed income markets will offer little opportunity, except for adept stock pickers. Savings accounts and CDs will guarantee gradual erosion of wealth due to the effects of taxation and inflation. RE will not likely be a haven either. RE earnings, oil, the dollar... I realize this flies in the face of conventional wisdom, but I don't think market performance has much to do with earnings, and I think it has virtually nothing to do with oil. I calculated a correlation coefficient based on I think 6 or 8 weeks of closing prices in QQQQ and front-month oil futures prices. Conventional wisdom would predict a negative correlation---as oil goes up, stocks go down and vice versa. In fact, the calculated correlation was not negative, but POSITIVE (albeit weak; r = 0.2 as I recall). I posted this a few times, I could give you the link if you like, but it would take a while to find it. Now earnings are a bit trickier, but I have noticed that even when earnings are quite respectable, we can and do get market corrections. The last two quarters were excellent examples. Earnings were quite good, above average in fact for the S&P500 companies and the NDX companies also. So were forward projections. Yet the market corrected rather strongly. The fact of the matter is that the market moves in directions dictated by big players, and I just don't think they pay much attention to oil, or what Bush or Greenspan are saying (if they even know who these people are), and earnings. Many people are not aware of this, but at least 60% of the trading volume on the NYSE is program trading. That figure is probably considerably higher on the Nasdaq. And program trading is certainly not based upon the price of oil, or Greenspan's latest enigmatic comments, or earnings, or the CPI or any of that. I suspect Kevin could provide a lot more insight there, although he might be constrained in what he can and cannot say. Then there's the $1 trillion in hedge funds, and the $120 billion annual inflow into hedge funds. I doubt they are paying much attention to the above either. So my point is that the things that actually drive the market are much different than the things being bandied about by the talking heads and the various newswires. And also that I agree with you about the possibility of a major pullback/downtrend. I just think it will not happen this year. TA is not affected by the source, and cannot really identify it in most cases. But TA tells me this bull market will continue at least thru the end of the year. Here's just one example of why I think so, but this is certainly not the only reason: 139.142.147.218 I think you can also appreciate something else from this chart. The sharper the angle of QQQQ (that is, the more positive compared to the angle of the regression channel), the sharper and stronger the pullback. Now the recent rally has been very sharp indeed. So the longer this continues, the sharper and stronger the expected pullback will be. T