Myself,Your thoughts on this QQQQ scenario,tia,
In Harry S. Dent’s June newsletter, he stated:
“Buy targets have come from clear support levels in indices like the Dow, S&P 500, and Russell 2000. But [the Nasdaq) shows an upward trend line in bottoms in the Nasdaq that would similarly suggest strong support near term at 2,150 or 2,115 to 2,120. On a closing basis, the trend line came through at 2,150, which triggered our recent buy target… the Nasdaq is the most oversold and clearly close to a bottom and a new rally ahead.”
I did some research of my own to see how the Nasdaq performed last time it was in a similar support/resistance as it is currently.
Here’s the current Nasdaq technical picture: The techs have stayed below the 200-day Moving Average and the 50-day Moving Average for 15 total trading days. It’s currently using the 10-day Moving Average as support to trade in near-term rises and falls, albeit in a semi-flat manner. The 10-day MA is the lowest common support line of Nasdaq at 2,187.00.
The last time this situation occurred was between April 12, 2005 and May 17, 2005. The Nasdaq spent a total of 24 trading days below the 50-day Moving Average and the 200-day Moving Average, using the 10-day Moving Average at 1,928.81 as final support.
At the beginning of the 25th trading day, the Nasdaq opened at 2,008.63 and it rallied 89.17 points by June 2.
Taking a look at the 200-day Moving Average change, it was at a value of 1,990.31 in April/May 2005. Currently, the 200-day is valued at 2,030.65 points. If you take that closing average as the end-all, be-all of support, based each day on the previous 200 days of closing prices, then there’s no doubt that the Nasdaq continues to grow in the long term.
Looking at the current formation on the Nasdaq, and the similar one from April/May 2005, I agree with Dent that we should see a quick upside rally to Nasdaq’s 2,320 at the 50-day Moving Average by the end of June.
This is in place with what we call a “June Christmas” rally on tech stocks.
Since we use the Nasdaq-100 for a proxy, I would anticipate that the QQQQ 41.00, approximately two points above its current value, is the next profit-taking opportunity for traders and investors alike to get the best bang for their buck before another few months of limbo… or summer doldrums.
And if you forgive me for a moment, I will tell you that the Nasdaq is in fact in place for a long-term “bubble” again. Although it’s been in a similar formation on the monthly ticks for some time now, this slow rise only adds to the support that could signal a Web 2.0 boom that many Taipan editors anticipate.
The only signal out of whack is Relative Strength, and once that gets in line, the tech bulls will really have a reason to smile.
