QQQQ ex-trendline support from April 2005 lows, now resistance, is at 41.15, which is also 20 dma. As I suggested in my previous post, the first area to overcome will be NDX 1635, which is ex-trendline support from October 2002 lows and would correspond to QQQQ 40.16 or so, at the 10 day ema. If we manage to break out above 40.16 (where I recommend taking profits), then there is a definite chance we will move right up to 41.14. But make sure you don't get married to any bullish bias once we start hitting QQQQ 40 on a rally. It could be somewhat treacherous above that. Many traders took some longs at QQQQ 40 and they will try and get out at "even", giving us some selling pressure when we get there. That is the nature of the beast. There is a possibility we put in a low but I want more confirmation. We've seen some real damage and we might meander some more before finally breaking out to the upside on a sustainable base. If we lose QQQQ 39 support, next stop will be 37, 100 % projection of January H/L. Not a pleasant thought, but it could very well happen if any rally fails to hold above 10 day ema. The good news is that bullish advisors have completely disappeared (see Mark Hulbert article and link below)and equity put to call ratio reached a closing high of .80 on Wednesday and was followed by two back to back readings of .75. Any equity put to call reading above .75 is unusual and a sign of pronounced pessimism. although I hasten to add, not an extreme. As for total put to call ratios (index and equity), the October lows of 2005 had five closing back to back readings above 1. This week we saw six closing back to back readings above 1, including 5 above 1.22 and one above 1.5. Monday saw an intraday spike to 2.20. Everyone is getting quite bearish indeed.
This entry was posted
on Friday, May 19, 2006 at 6:16 PM.
