New QQQQ short term down-trend begins; buying QID
I am very cautious about the current market. I believe that we have entered a new QQQQ short term down-trend. On Friday there were just 11 new highs and four new lows in my universe of 4,000 stocks. In addition, a number of leaders have broken down, including AIPC, QSII, ALGT and NFLX. When rally leaders falter, it often is an ominous sign of things to come.
With the GMI now at 3, I am becoming more defensive. I am getting out of QLD and will buy some QID (ultra short QQQQ ETF). If this down-trend continues, I will make money in QID as the QQQQ declines. I am concerned that only 20% of the QQQQ (NASDAQ 100) stocks had a MACD close Friday above its signal line. The perplexing thing about this market is that my longer term weekly QQQQ trend indicator remains positive. But any long term decline must, by definition, begin with the short term indicators declining. So, this may be a contained decline withing a longer term up-trend. The key is to be cautious and wait for the market trend to reveal itself. I remain mainly in cash.
Comments ( 4 )
Tom G added these pithy words on Tue, 5-26-09 at 10:40 amI know your advice is free but it just cost me a lot of money this morning. I sold out of QLD and bought into QID. Stopped out of QID within an hour.
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dave added these pithy words on Tue, 5-26-09 at 1:32 pmDr Wish doesn’t have a crystal ball which forecasts daily moves.
You may be dumping QLD tomorrow and buying QID. He expects a downtrend which may take weeks to develop.
telzinga added these pithy words on Tue, 5-26-09 at 7:28 pmSurprise move today. Irrational & Trend less. Could have gone either way. If you got some of it you got lucky. The uptrend was violated about 3 weeks ago when we got our first weekly lower high and lower low. There are other definitions of the trend reversal but that was the first sign of danger I saw and when I exited. Now what to do, We could bounce in this range QQQQ (33 – 35) for a while and that could be a reasonable trade buying & selling the range using tight stops. We could break out higher above 35.50 and start a new uptrend which would be reasonable with a stop under the breakout. Or the market could drop under 33 and start a new downtrend. I cannot see putting money to work here until a new trend clearly develops. I don’t feel like I have any trading edge right now.
ghandy added these pithy words on Wed, 5-27-09 at 8:31 am@TomG — blaming others for your own choices is pathetic. Have a plan and own up to your own actions or stop trading.
Dr Wish, thanks for sharing your market insights. Great site.
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