The "Q’s" - QQQQ

 

 

 

 

 

 

 

 

5 minute QQQQ chart

Stock Market Report - Pre Opening - February 7th 2008

Weakness in the market continues to be the theme. Last night’s Cisco (CSCO) numbers and weak guidance has the Nasdaq selling down significantly in pre market. Other companies that share the sector, and even some distant cousins of the sector are also being hit with people selling out. Apple extends their losses further this morning before the open and is now trading around $119. Hard to tell at this point if any bounce today in tech stocks will hold or not, but I have to say that trying to guess a bottom is nothing but asking for trouble. I am NOT a buyer of any tech related companies here.

The chart below is a weekly chart of the Nasdaq. Notice that we are very close to a significant trend support area. I expect to see some buyers of the Q’s (QQQQ) if the Nasdaq reaches the trend line. The question is if it will hold or not. If the Nasdaq were to close below the trend line I identified on the chart it will have significant bearish implications for the Nasdaq for it will have fallen out of a trend that was in place for 3 years.

 

 

 

 

 

 

 

 

 

(clicking on the chart will take you to a dynamic chart with 20 minute delayed data)

Retail sales have been pouring in this morning and the overall consensus has been weak sales growth. Wal-Mart (WMT) being the biggest this morning with lower sales (again). Some bright spots in the retail sales but the overall picture is weak. Macy’s (M) is laying off 2,300 employees.

The Bank of England lowered their interest rates by 25 basis points and the European Central Bank left theirs unchanged.

Initial jobless claims came in as well this morning and the continuing claims (the more important number) continues upward which presents us with further evidence of a deteriorating job market.

Big Day on the Dow?

The Dow was up over 300 points, the Nasdaq Comp. up almost 90.    Goldman Sachs says they are “short” the housing problem and they don’t seem to have any exposure to the CDO’s or SIV’s.  The other broker/bankers also reported that the whole SIV/CDO problem is contained.  Wal-Mart had decent earnings and forecast in-line revenues.  The Nasdaq 100 QQQQ’s jumped up, too.  Is this the “all clear signal”?  It all sounds good, right?  Two questions I would have is, why is GS “short” anything  and why did Citigroup, Lehman’s, et al., want an SIV bailout fund if all the problems are contained?  New lows outpaced new highs today and there is still a lot of selling into any strength.  Yes, some stocks recovered some of last week’s losses.  We said to expect a technical oversold bounce and that is what we got.  Nervous shorts were definitely covering.  The anxiety and fear in this market runs on the buy or the sell side, whether selling, buying, selling short, and covering shorts.  That’s why we are getting such big point swings on a day-to-day basis.  The bias is still to the downside at this point.

It is very difficult to keep emotions out of a day like today.  Seems like everything is going up and it will never stop.  There isn’t any real evidence of an “all is well”, we just had a technical rally and the Q’s experienced a short squeeze.  Option’s expiration is this Friday and I expect a wild week.

More later!

The Day that Was-October 24, 2007

The existing home sales numbers showed more houses waiting to be sold and prices going lower.  Merrill Lynch is having some major problems with the “sub-prime” issue.  They are writing down billions, and during the conference call they were not willing to discuss how much worse it could get.  This caused the stock to drop even further.  There is no clear picture on how bad these losses will be for any financial institution.  This problem is far from being “contained”.  Not a great start to the day.

The Dow had another up/down time today that can give one whiplash!  13400-13500 is the area to watch on the Dow, not wanting to see it below.  The S&P closed over 1500, but under the weekly trendline. 1490 is a critical support short term.  The yen is holding it’s strength, adding to worries of carry trade unwinding.  The Nasdaq composite is trading in a rising wedge on the daily (Chuck will put charts up tomorrow, he may disagree, but I see the wedge).  The semiconductor sector (what I deem “tech”) is sickly.  The SMH and $SOX lost a good bit of ground today.  The QQQQ seems to have a mind of it’s own, but weakness in the Nasdaq 100 may finally have an effect on it’s upward trajectory. The financials, homebuilders and retail sectors are still down.  And the flight to safety in bonds continues.

 The volume today was higher than normal, decliners outpacing advancers, more new lows than highs.  The pattern continues with higher volume on the down days.  The rally at the end of the day was interesting.  Apparently, there was talk of the Fed’s instituting an emergency rate cut of 50 basis points.  Why an emergency cut would be necessary before the meeting next week is beyond me.  Confirmation did not come and the market pulled back a bit from it’s upward frenzy.  What this shows, however, is the extreme emotions at work here.  It could be a preview of what will happen when the Fed’s do cut rates next week.  Of course, I have no idea if they will cut or by how much.  But, if I were a betting woman, I’d say they are cutting rates.  This volatility will be at work in the market for some time.  Don’t forget that the popular momentum stocks can go down even more quickly than they go up, so understand you are playing against big funds when it comes to these stocks.

 The primary trend of the market is still upward.  That doesn’t mean that the short-term trend is up, or even the intermediate term trend!  That’s why we are watching more than just the major indices to tell us the health of any move in the market.  Then we make our trading plan.  That keeps us from jumping into or out of stocks based on an emotion-driven, rumor-laden move. 

These wild swings in the market can drive a trader crazy.  It will bring out emotions you don’t want others to see in public, especially if your stock is dropping.  Even if your stock is rapidly going up, your heart races, your palms get sweaty, you get knots in your stomach.  It’s a bit like meeting a blind date.  Your friend said he has a great personality and he sounds intelligent on the phone. You’re nervous about seeing him for the first time. Then, you meet and he’s incredibly handsome to boot, and now you’re really nervous! (Anyone who’s ever been in this situation knows what I’m talking about).  But, the thing that keeps you from stuttering, sputtering, and acting silly, is if you have a plan for the date.  Dinner, movie, drinks, and dancing.  It’s the same with trading.  To keep us from acting silly we have a plan with entry/exit, support/resistance, broad market outlook. We have to keep things in perspective.

See you in the morning!

After Hours

Wow, what a day.  Trades were all over the place.  A lot of selling going on this morning, short covering into the afternoon.  So much “up and down”, it was like I was back on the LCM’s in the Atlantic.  And what a feeding frenzy with RIMM, AMZN, AAPL, BIDU and GRMN.  Dry shippers were up into the close.  The Q’s hit a new high, but promptly came down after hours when Amazon’s earnings came out.  They did OK, and guided higher, but it wasn’t enough for some traders.  After reaching the $100 mark, it is now trading at $92.44.  The conference call is going on now, so no telling what the final price will be.

TIF hit our entry price today, so take a look at the Swing Trade section.  We’ll be back later tonight with the wrap-up for the day.

Chart Request - QQQQ

A Rebel Trader member has requested information on the QQQQ.

The Q’s as they are conveniently called is a fund which is tied to the performance of the Nasdaq-100 index. The QQQQ can be purchased and sold just like a stock. It can be shorted (no uptick requirement), day traded, swing traded, or long term buy and hold.

An ETF is independent of trading volume. Where as the amount of volume shown for an ETF such as the case here with the QQQQ is only a representation of trading activity. It in no way controls the movement of price. The price is a representation of the Nasdaq-100 index. For a list of the companies that the QQQQ indexes to see this link: Powershares QQQQ

Performing technical analysis on the QQQQ is much the same as any other stock. However formulas that utilize volume in their calculations will not be reliable. But support and resistance along with trends are still valid tools for evaluating the ETF.

Currently the QQQQ is trading at new highs. Shorting the QQQQ is a matter of examining the broader market for signs of a top, or by examining the major holdings that make up the QQQQ for signs of individual stock performance and if they are working on a rollover and a new down trend.