Invesco QQQ Trust Series 1 (QQQ)

[frenchee]

Consolidating Or Getting a Grip?

by Bob Colby

The stock market has been stabilizing since its low last Wednesday 3/23/05. From the peak on 3/7/05 to the low on 3/23/05, the S&P 500 dropped 4.91%. Short-term technical market indicators hit their deepest oversold readings of 2005.

Over the past 3 trading sessions, downside momentum has ground to a halt. Some indexes are at or near various technical supports. The S&P 500 retraced a normal one-third of its August-March upswing.

It seems possible that the 3-day loss of downside momentum is merely a 3-day Pennant Consolidation Pattern within a continuing downtrend which could resume.

On the other hand, it seems equally possible that the 12-day correction reached a turning point last week, and the market is stabilizing and building a base for a rally.

The latest survey by Investors Intelligence shows Bulls at 53.6% versus Bears at 27.8%. This is the lowest net Bullishness since last September, which might be Bullish, according to the Art of Contrary Opinion. Volatility (VIX) is heading up, and that is also Bullish.

Systematic trend-following indicators remain Bearish for the short term, except now they are very close to a turning point.

Oil, commodities, gold, and foreign currencies are breaking down, and that might encourage money to flow back into stocks.

Monday’s activity again suggests that the Demand for stocks may be beginning to match the Supply for stocks. The stock market started strong but gave back most of its gains in the final hour of trading. The S&P 500 finished with a gain of only 0.24%. Most but not all major indexes confirmed moderate strength, except for Biotech, Networking, and Long-Term Bonds, which fell more than 0.50%.

Breadth was moderately Bearish, with 1436 advances trailing 1868 declines on the NYSE. Volume on the NYSE eased slightly to 1.70 billion shares, down from 1.72 billion shares traded in the previous session. Volume may reflect a hangover from the long holiday weekend.

The ISE Sentiment Index is now mildly optimistic at 1.95, compared to a neutral 1.73 previously. This indicator is a call/put options volume ratio based on new customer positions.

Systematic trend-following indicators remain Bearish for the short term, except now they are close to a turning point.