Saturday, April 19, 2008

Qs Weekly Update

Top chart is daily, weekly, monthly bar 3 linear regression study (30,11,4) .
This week's strength has now put all 3 time frames into the bullish mode. Only the weekly chart displays an overbought RSI.
The daily chart's technicals are all positive.
Weekly chart's technical are coming off a 3 month bottoming pattern and are now uniformly upslope.
Monthly chart is somewhat ambivalent, but the upslope MoneyStream and RSI coming off extreme oversold conditions have to be weighted heavily.
Of some note is the fact that average daily volume in the Qs has now subsided to that of a year ago (approx. 125M).
The second chart is a blow up of the daily Qs 3LRs study and reflects a concept developed by Don Worden called "kissing the channel goodbye". Don, of course, is the driving force behind Telechart and provides an always thoughtful daily commentary on the markets as part of the Telechart subscription service. I've used Telechart for over 20 years and despite the spate of other sophisticated software currently available on the market, I believe Telechart is still a unique and very useful product (unsolicited testimonial).
The point that Don tries to make with the channel kiss, (he's a big fan of linear regression studies), is that the channel reflects reactive support and resistance levels. A goodbye kiss occurs after price has broken either above (or below) the longer term channel (I like the 30, Don has other periods he prefers) for a period of days and then retreats back to the upper (or lower) channel.
Don suggests that a subsequent short term consolidation at the upper (or lower) channel, followed by a breakout will most often lead to a new trend (in this case UP), of indeterminate duration. Hence, "kiss the channel goodbye". This pattern is now evident in the Qs, DIA,SPY and IWM. . a strong indication of market strength according to Don.
Those who have read this blog for a while know my hesitation to assume any long term positions in the midst of the current financial climate, but Don's perspective is still useful in developing short term daytrading tactics, since, if correct, we can expect more trending days and fewer gap failures as the markets recover to longer term resistance levels. And now a little different technical perspective:
The A50 is now is overbought territory, which would not be surprising if the economy was robust and growing. However, the dismal underlying economic fundamentals (remember GE ?)must be considered as an overhead weight sitting on the markets. With looming prospects for more unemployment, outsourcing, offshoring (a delicate way to describe giving your job to an Inidan or Chinese) and a dreadful housing market, I remain skeptical about the vitality of the current rally.
The A200 is substantially lagging the A50, which is close to reaching Oct 2007 levels. This suggests a narrow leadership in the NDX (QQQQ), and without wider participation of the NDX components in the current rally, it's sustainability is limited.
A good daily indicator to keep an eye on, for better or worse.

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