QQQQ closed with a relatively bullish candle. The first April gap was closed (chart) and we ended the day above the gap close (45.27). However, bulls would have preferred a close above 45.83, 50% 2008. That is going to be the key number you will want to see on an hourly basis before placing any big upside bets. If bulls fail and lose 45.27 again on Monday, we have a very strong pull to 44.70, 61.8% of 2008 and the second April gap open. That gap gets closed at 44.14, but losing 44.70 better only be a quick snap, since it is of course the most important fib number out there. A close below 44.70 almost guarantees a retest of the bull market trendline, now at 43.50/43.70. A rally from that level could be potentially very bullish.
On the subject of the bull market trendline, a look at the monthly chart with fibs clearly reminds us where bulls held the line in March, and that is at 41.58, 31.8% retrace of the entire bull market for this ETF. I will confess that even though everything is pointing to a complete collapse of the markets, there is something very compelling about the action in the tech sector. Frankly, that is where I would start placing some longer term upside bets as long as we stay above 43.50. For the next bear market rally, you need to be be long the Q's. Period.
I closed my short positions pretty much all around and am now day trading and waiting for a better signal. The general media has become extremely bearish and the one article that really got me worried as a short was the one CNBC put out, recommending that the general public start shorting stocks. That is a very, very scary development for anyone in bearish positions. Shorting is already a tough game, but when you tell the average Joe to got out there and engage in that game, you know his head is about to be handed to him on a platter. In other words, don't get stuck in a bias. That does not mean go long, it just means be ready to go long if we get the signal. And we could be there any day, if not already.
The other possibility, is that we hold the line with sideways trading throughout the summer. That would favor pros and we will take advantage of this, by day trading and not placing big bets either way. That is frankly my preferred approach at this stage. Day by day, short or long, I'll take either one. Just know the overall parameters.
This entry was posted
on Saturday, June 28, 2008 at 6/28/2008 10:43:00 AM.
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