Sunday, June 13, 2010

Crossroads, Uncertainty, Indecision ........ Not the QQQQs

Last week I put up a posting about the how the chop in the market was nothing for an investor, position trader or possibly even swing traders to participate in. A few days on and some nice time outside with the family and I am coming to another view on the Nasdaq. Although the S&P 500 and Russell 2000 are at key R/S or in a range (see charts for SPY and IWM on, the Nasdaq looks decidedly weak. Let me illustrate with a few charts of the PowerShares QQQ Trust, ticker: QQQQ.

First look at the monthly chart. This has clearly fallen below the up trend line from the March 2009 lows, and a double top. Monthly volume on the chart is for the first ten days so I extrapolated it out for the month. Would be over 2 billion shares again at this pace, a solid level comparable to May.

Next the weekly chart

This also shows a fall below the up trend line. Fall was started with a long candle with increased volume. Now the weekly chart looks to be flagging before another move. Typically you would expect it to be down as a continuation. There is a bit of a conundrum in this chart though as the 50 week SMA has give support recently and is rising, but the other SMAs are flat and 20wk SMA proving resistance above. The MACD indicator is also signalling a downward trend.

Now on to the daily

Here there is clearly a descending triangle with descending trend line on volume as well. The SMAs are rolling over and converging, probably near 45 in a few weeks. RSI is leveling near but below 50 and the MACD is indifferent. This feels ready to fall.

The final bit of evidence for me is that the market leaders in this sector: Apple (Ticker: AAPL), Amazon (Ticker: AMZN), and Google (Ticker: GOOG) are are looking weaker.

This could all still blow up in my face of course, if the market decides it is time for a test of the 50SMA at 47.52, I am not counting on it but will be hedged against it.

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