Saturday, March 01, 2008

Qs Weekly and Month End Update


Today's commentary is really a follow up to some of the trends that I noted in Tuesday's post on Deconstructing the Qs.
The upper chart is 3 linear regression study (30,11,3) of monthly bars, and this is where it starts to get a bit scary, because if the Qs do fall through that lower LR30 band of support at 42.15, then there's a lot of downside room to the mid 06 lows of 36.50. Currently, all the technical indicators are pointed down, with no oversold readings. The Qs hit a low of 42.15 earlier this month and a low of 41.61 in January. If we get back there again, the odds of a break through are substantial. The inverted W pattern (or M to some) on the daily chart is bearish.

The weekly 3 LRs study has shown the LR11 mean to be the declining support level for the past 7 weeks. although there is an upsloping LR3 channel, a down day on Monday would change the direction of that pattern to 45 degrees down slope. The supplementary technical indicators in the lower panes suggest further weakness, at least short term.
The daily 3 LRs study shows the volatile lateral consolidation that the Qs have been displaying for nearly the entire month. The LR11 channel has done a good job of capturing most of the short term support/resistance swings, and after some encouraging gains earlier in the week, he Qs have retreated to the upper LR30 channel band, and the so called "ledge" condition that I talked about earlier in the week, looks like a distinct possibility. Although it's not shown on the right side price scale, a projection of the LR30 mean down to the price panel would equal a target of 37, which is why the monthly chart above takes on added significance. So even if the Qs were simply to regress to the LR30 mean, the net result would be a price of 37. Could we see another 14% drop in the Qs? I think an episodic event, like a big bank failure, could get the whole market down another 10-15 % in 3 days.
At first glance the above chart looks bullish, until you realize it's the VIX. There's been a lot of recent blog chatter about the VIX recently by some very smart guys who know a lot more than I ever hope to and I mentioned 2 of them in last Thursday's VIX post. Rob Hanna threw his hat in the ring this week with 2 VIX posts. He runs a great site that's always worth a daily check and Phil also has some comments on VIX trading, displaying his usual insightful analysis.
If you believe in mean reversion and linear regression indicators, then the markets are in for some rough times until the LR30 channel slope starts to head down.
Finally, a couple comments about Friday's intraday action. If you can see the chart in 1 minute bars (not shown here), you note that at 10:11 the Qs dropped .20 on 5.4M shares. . .that's a big order coming through the pipeline, and one even the best order defragmentation algorithm couldn't hide. From then on, until about 13:30, the Qs were on a squat bar, riding the 20 bar MA. When the Qs broke the 20MA to the downside and the signal line (yellow MA component of the 5,20,3 MACD) turned down, any chance for a late day rally was slim.
The lower chart shows the NYAD 60 minute chart for the past 12 days. If you enlarge the chart you can see the selldown pattern in 7 of the 12 days, and as mentioned earlier, the NYAD reading of .15 at the open is not to be interpreted as "it can't get any lower, so I should buy". Friday's action shows you why.

4 comments:

Jason said...

hello..thanks for posting your analysis on the Qs

May I ask what software you use to capture screen shots off the sspro platform and save it as a img file for uploading?

Thanks.

bzbtrader said...

I use the PAINT accessory program.
First you have to run print screen;
then open PAINT and capture image;
then Copy captured image;
then open FILE save as. . .NEW;
then PASTE image to FILE and save as whatever file name you want.
It's a pain, but the only way I've found to do it.
Send me an e-mail off line at bzbtrader@aol.com if you have problems and I'll try and walk you through it.

Cucca said...

That's funny, is the big "M" the same thing as an inverted "W"??? Nice posts senor.

bzbtrader said...

Oh Cluselss One,
Thanks for pointing out my dyslexic penchant. You know perfectly well that one man's "inverted W" is another man's "M". I think of the W as a potentailly bullish pattern and the inverted W as, well, . . 3 strikes and you're out. . .and a bad sign for the bulls.
Thanks for stopping by.