QQQQ update
Some of you are in QQQQ trades or waiting to go in. First of all, remember that what applies to NQ (NDX futures) applies to QQQQ, so my NQ updates are relevant.
The Q's closed the week right at 38.77, which is critical support, as you can see from the daily chart. It's the 38.2% retrace of the July rally and more importantly, ex-downward channel resistance, now support and eight cents above 50 dma. If the Q's manage to hold ground, bulls will get relief. However, note the key failure three days in a row to close above the 20 dma. Further up, QQQQ has 23.6% retrace resistance from 2004 high/2005 low at 39.18/39.19, an area I think bears will strongly defend. These will be the paramaters to watch on Tuesday: initial 20 dma resistance at 38.93, Wednesday high of 39.01 and last stand for bears, 39.19 ( a solid short entry if you get so lucky, with tight stops). On the flip side, bulls need to hold 38.69 at all cost, followed by 38.40/38.50 zone, otherwise last week's lows will not hold and the downside target shifts to 37.93.
Frankly, I see no particular reason, other than a burst of short covering, for anyone to be in stocks until the Fed's meeting on 9/20. My guess is many will use rallies to go to cash.
The buying of the last few days has relieved the daily oversold cycles and now opens the way to further downside. Just one look at weekly oscillators tells me we have not bottomed out. My favorite trade next week would be to short a rally, which could occur on Tuesday. Shorting a breakdown of 38.70/38.77 support is also a viable trade. Don't forget that the week after is option expiration week and that there is lots of put support at 38. On the other hand, those put sellers will panic if we get too close and could spark a selling frenzy as they rush to cover those long puts by shorting the underlying. Tread carefully. The more long term investor that does not wish to play the short side might want to sit it out until the dust settles. I have a much more pessimistic view of the markets than the media does as the overall complacency out there troubles me and has since July. I would not be surpised to see the DOW lose 10K and SPX 1200 in the coming weeks, if not days.
This entry was posted
on Friday, September 02, 2005 at 7:14 PM.
