I'm seeing the early stages of an intermediate term (months) bottom in the Nasdaq 100 (QQQQ etf). Last week the panic lows from two weeks ago were tested and held, which I see as a big plus for the bulls. The candlestick Friday on the Q's as well as the other indexess look ominous and bearish due to the late sell-a-thon Friday afternoon but I'm not going to put too much weight in that because end of week selling is now typical due to expectations of weekend news (and any news is bad news right now). I'm also seeing some strongly positive divergence on the CCI as well as a weak buy signal on the stochastics. Confirmation of the intermediate term bottom will come when the Q's break last week's high at $36. I'm looking for a retrace back up to previous support at $43 or the 200 dma, which ever is lower. All bets are off if the Q's break $29 which is a great place to set stops.
If you are looking for an idea in tech land you might take a look at GOOG. The GOOG chart actually looks alot like the Q's, unsurprisingly, but I especially like the surge in volume Thursday and Friday which would make me feel like the recent lows have very strong support. Furthermore, GOOG recently had earnings and beat the street, this means options are cheap now and the risk of earnings is gone for three months. If GOOG breaks $395 the measured rule target is $480. Good luck next week, and remember to always set stops!
On a side note, even with all the carnage in the financial world China is still growing at 9% per year. One has to think that the collapse in their stock market has created some even more enticing buying opportunities than in the US. You might want to take a look at FXI.
2 comments:
I agree with your call on the Q's. It looks like they could take a bounce to around $42 (the 38.2% fibonacci retracement on the monthly chart) before heading back down. There is some supporting evidence from the money flow that buyers are trying to take some control of this market.
I don't think this move will have the strength to break the resitance line of the falling wedge. Your Thoughts?
Hey Steve, yes I think it is very unlikely that the Q's will break through heavy resistance in the $42-$43/200 dma area. Although, based on the duration of previous cycles in this bear market (3-4 months), I am expecting this move to last for some time, maybe until January. How this plays out is unclear to me, at some point I would expect alot of sideways, declining volatility action.
I'd expect that ultimately what happens after this up cycle will depend on the credit markets, commodities and the economy in general. Stock prices have fallen enough for me to believe that the bear market is over if things improve. On the other hand, if things deteriorate further and especially if inflation ramps up again, then we could see a major collapse in early 2009.
With all the inflationary stimulus by world wide governments one has to think there will be a major surge in commodity prices which will ultimately put the nail in the coffin. So my guess would be the latter scenario but I am open to all the possibilities and unlike the end of the last down cycle, I am now open to the possibility that the bear market lows are in.
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