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

To: stock2005 who wrote (4772)	5/17/2009 3:43:26 PM
From: Walkingshadow	Respond to of 4814

I am not at all sure the lows of 2003 will not be revisited. In fact, I think that is likely. That's because it is common for lows to be revisited many years after a bubble. Here are two examples: gold and the Nikkei. The top of the bubble does not appear in the chart on gold, but that happened in 1979 as I recall. But you can see the aftermath, which is pretty typical for a bubble, no matter what market you look at, regardless of the time period, regardless of the country, regardless of what is being traded. Gold hit what people thought was a bottom about 3 years after the peak, when it dropped to 295. But, as you can see, that was not the bottom. Gold dropped to 281 a few years later, then proceeded to rally. Everybody thought THAT was the bottom as well. But it wasn't, and over 20 years after the bubble burst, gold finally reached what was to be the final bottom at 252. Now, 30 years after the bubble burst, gold has exceeded 1000 (briefly), and is now trading at 931. But anybody who bought gold at the peak in the late 70s and held has not nearly broken even yet, because of the declining buying power of the dollar. They will probably have to wait another 10 or 20 years for the true break-even point. The Nikkei is another example. After hitting a high of about 39,000, the Nikkei dropped 81% to hit a "bottom" of 7603 in 2003. But even that was not the bottom, and the Nikkei went on to hit 6994 late last year, a full 20 years after the bubble burst. So here are two examples of bubbles that burst, and the bottom was not reached until 20 years later. That is fairly typical, and it would not be surprising to me if that is exactly what happened to the Nasdaq 100. What I am suggesting is that for an index to reach a bottom 20 years after the peak is not only typical, it is common. There are exceptions, however, notably the Dow, which reached a bottom about 3 years after the 1929 peak at 43. That represented an 88% drop from the peak, which is more than usually seen in a bubble. However, it rallied moderately after that and reached the mid-180 level in 1937, almost 8 years after the peak. Then hit two more bottoms just under 100 in 1929 and again in 1942, 14 years after the peak. That proved to be the final bottom. So it is common for bottoms to occur 15-20 years after the peak of a bubble. Partly for that reason, QQQQ is very likely to eventually see $23-$24 (or less) sometime between now and 2020. But there is another reason as well: that $23-$24 level would represent an 80% loss from the peak. Every bubble I have ever seen has lost 80%-82% (sometimes more) from peak to bottom. There is no reason at all to presume this time it will be different. WS

To: stock2005 who wrote (4772)	5/17/2009 4:48:43 PM
From: Walkingshadow	Respond to of 4814

I don't follow FAS, or the index it tracks (Russell 1000 Financial Services). But my take on the chart is: 1. There are definite technical sell signals in place 2. Moderate support at the midline of the BBs (i.e., the 20 sma) is being tested, and has held so far. 3. Trendline support has broken down. 4. Next test of support is the blue region that is defined by chart support, the lower rail of the BBs, the 100 sma, and the 50 sma, all of which converge on this zone. In short, FAS (or the $RIFIN) looks only slighly less sickly than QQQQ. The only real difference I see is that the most recent candles in QQQQ are decidedly bearish, but this is not the case with the RIFIN. So my prediction is that FAS/$RIFIN is headed down to test that region of support. I think there may well be a temporary bounce there. For one thing, that would go a long ways towards keeping people fooled into thinking happy days are here again----a mini bull trap within a bull trap, I suppose. But ultimately both QQQQ and FAS/$RIFIN will fail at that level. And, I think QQQQ will see $24 or less by the end of September.

To: stock2005 who wrote (4772)	5/17/2009 7:21:24 PM
From: Walkingshadow	Read Replies (1) \| Respond to of 4814

Here's the long-term chart of the Dow after the bubble that ended in 1929. A few important points to note are: 1. From the high in Aug. 1929 to the low in 1932 the index lost almost 89% of its value. 2. The index then entered a long trading range that lasted about 20 years. That range was very wide.....about 90-95 points from top to bottom, which is about 100% using the lower rail as the denominator. Expressed differently, that is a difference of about 50% from the top rail. 3. The highs of 1929 were not seen again until almost 26 years later, in early 1955. 4. If one assumes that the buying power of the dollar declines 3% per year due to inflation (a pretty conservative estimate), then those who bought the Dow in 1929 did not break even in real buying power terms until 1987----a full 58 years later. So much for "stay the course"....... The main point I am trying to make is that once a bubble has formed, that index is dead meat for at least a quarter century, during that period, it will generally hit several bottoms, and usually the final bottom is not seen until about 15-20 years after the bubble begins to implode. The history of bubbles shows that there are remarkably similar common characteristics. THIS is what we are looking at in QQQQ's future, now 9 years after the bubble imploded. So, I would have to conclude that history is telling us that QQQQ may not have hit bottom yet, that the post-bubble trading channel has not been defined yet, that this channel would be defined by a retest of the Sept. 2002 low (about $21), and that the highs of March 2000 will not be reached again for another 15 to 20 years or so. Now you see why I think the Shanghai index is such a high-probability short?