Saturday, May 03, 2008

Qs Weekly Update

Daily, weekly, monthly 3 linear regression study above (30,11,3).
For the week the Qs are up 1.62 (3.44%). The bulk of the gain occurred Thursday (1.49), with the rest of the week essentially flat.
On the daily chart the Qs are topping the upper LR30 channel, which has provided overhead resistance since March. With the Qs solidly in overbought territory, any weakness would likely bring the Qs back to the LR30 mean at 47.15 as the first line of support.
The weekly chart puts the Qs solidly at the LR30 mean and clearly on an upslope with channel resistance at 51. This target seems like a long ways off, but hope springs eternal, and while the economy is in the toilet, the markets are built on expectation and right now the apparent bet is that things can only get better.
The monthly bars may give a little better picture of the longer term, as the Qs are riding above the LR30 mean. The LR30 channel has provided support and resistance levels for 4 years (04 not shown) and the last quarter of 07 shows what happened when that channel was violated.
For longer term investors, calendar spread traders and buy/writers this channel may provide a useful template to gauge the probability of Qs momentum.
The A50 continues to climb, now at 07 highs and well above the 200 DSMA. My own timing model suggests the Qs are overdue for a retreat, but that's just my opinion.
The A200 shows that, as suggested 2 weeks ago, more DX components would have to show strength in order for the A50 and the DX (QQQQ) to rise. That's clearly what has happened, especially in the last week. As the A200 approaches the 200 DSMA, the odds for a retracement increase.
Above, the Qs:DIA ratio displaying the relative strength of the Qs since mid March. A chart to keep a eye on as the 20 DMSA has provided support for the current rally and a retreat below that line would indicate that the rally is failing.
Finally, the Qs:SMH ratio showing that the relative strength of the SMH which held for the first 100 days of 2008, has now morphed into a lateral pattern with little strength bias. Another chart to keep an eye on, as weakness in the weaker QQQQ components will likely return the SMH to a position of strength.

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