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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 (4794)	5/28/2009 12:43:56 AM
From: Walkingshadow	Respond to of 4814

Hi stock2005, Well, that's the dilemma....sometimes when the market hovers in a trading range, that can represent a consolidation phase prior too resuming the prior trend (in this case, up). But other times, the breakout is to the downside. How to tell the difference? Not so easy, and certainly arguable either way. But FWIW, I think the case is much stronger case that this is the last gasp of the medium-term uptrend (I would call it a bull trap) we have been in for almost 3 months now. My reasons: 1. Sentiment indicators strongly favor reversal here. 2. Technical and momentum indicators, particularly in the long-term charts, also favor reversal. 3. Market internals such as the NASI are most consistent with reversal. 4. Volume patterns indicate very strongly that reversal is imminent, AND that the ensuing downtrend will most likely be either strong, prolonged, or both. This is just one factor that leads me to predict that we will eventually drop below the March lows. I can't really say, but I suspect this will not happen very soon, but probably will occur by the end of summer. 5. Valuations are not consistent with a final bottom on March 9, as I posted previously Message 25640283 Here's the current daily charts for QQQQ. You can see that the support range I detailed in several previous posts held, although I did not think they would Message 25640206 Note that the powerfully bearish candle that formed on May 7 has proven to be strong resistance, as expected (first chart). We may be making the dreaded "lower high" right now, and if so, this is very often immediately followed by an initial surge downward that is more powerful than the previous one (i.e., the bearish candle on May 7). So the two things to watch for now are a break of the support region, and a lower high immediately followed by a very strong bearish candle, then a lower low. That constellation would be final confirmation that indicates a medium-term trend change has in fact occurred, and will continue for months.