Here's my update for 27 Oct 04. The market did oblige!
Current Position: 200% Short Buy Stop: 37.91 Resistance: 37.13 Support: 36.63
Most pundits today gave the all clear to buy. I don't believe them. Because of this, I subsequently shorted the QQQ @ 36.68.
Most sustainable rallies start from oversold levels. Today's upside move doesn't fit the script. In fact, the MACD indicator is suggesting we are closer to a sell than a buy. How's this so? First, there's a negative divergence between the MACD and price in that price surged to a new high today and the MACD didn't surge to a new high for the swing. This is indicating a bearish undertone. Second, since the intermediate-term downtrend started in Jan 04, MACD has done an adequate job of calling the top of the short-term swings. The blue vertical lines on the chart show the MACD sell points. My reading of the tea leaves suggest we are near the level associated with a confirmed sell. From a long-position perspective, the reward/risk ratio is negative. Upside potential is 37.90 from a base of 36.73 and the minimum downside move is 34.50. In case I'm wrong on this speculation, my buy stop is 37.91.
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