Even so, today marks the first day in the end of the month buying window that nearly always takes place due to an influx of retirement account money into the market. While new money is being deployed, a great deal of shuffling takes place as funds redistribute their accounts. This should give the market some temporary support. We need to use this opportunity to put together a list of good short set ups. Ideally it would be great to see the broken trend line on the QQQQ (above) be retested near the $39.00 level. If $38.25 breaks first however, all bets are off and shorts should be established at the breakdown point.
Interestingly enough, there were a number of bull flag failures in the gold sector yesterday. The sector still has a chance to hold support, but this development is the first strike against a bullish case.
Bottom Line: We are hoping for a good wash out slide in the market during the month of October. The market has been moving up weakly on poor volume and even poorer breadth. Trade set ups have been failing at a much greater rate than they were during a similar rally last fall. This is a market that needs to shake loose a few cobwebs and a good retest of July’s lows would be a nice way to establish some volatility and increase buying interest once again. The short side has not yet produced a large number of opportunities. However, if the last line of defense on the NASDAQ is broken through we would be willing to bet that downside breadth will be plentiful. This will provide us with reliable set ups on both the downtrend and also good set ups on the following bounce back up. In short, much needed volatility could be reestablished under such a scenario.
Wednesday, September 28, 2005
End of Month Buying May Just Delay the Inevitable
As you can see from the QQQQ (NASDAQ 100) chart below the tech sector is in a precarious position. The uptrend has broken and has failed its first test. Its last line of defense is $38.25. If that level breaks down a downtrend will be firmly established and it would be well advised to trade the short side until the trend corrects itself. The semiconductors, which led this tech rally to begin with, have already broken through their last line of defense so probabilities favor a breakdown of the broader tech sector.
Even so, today marks the first day in the end of the month buying window that nearly always takes place due to an influx of retirement account money into the market. While new money is being deployed, a great deal of shuffling takes place as funds redistribute their accounts. This should give the market some temporary support. We need to use this opportunity to put together a list of good short set ups. Ideally it would be great to see the broken trend line on the QQQQ (above) be retested near the $39.00 level. If $38.25 breaks first however, all bets are off and shorts should be established at the breakdown point.
Interestingly enough, there were a number of bull flag failures in the gold sector yesterday. The sector still has a chance to hold support, but this development is the first strike against a bullish case.
Bottom Line: We are hoping for a good wash out slide in the market during the month of October. The market has been moving up weakly on poor volume and even poorer breadth. Trade set ups have been failing at a much greater rate than they were during a similar rally last fall. This is a market that needs to shake loose a few cobwebs and a good retest of July’s lows would be a nice way to establish some volatility and increase buying interest once again. The short side has not yet produced a large number of opportunities. However, if the last line of defense on the NASDAQ is broken through we would be willing to bet that downside breadth will be plentiful. This will provide us with reliable set ups on both the downtrend and also good set ups on the following bounce back up. In short, much needed volatility could be reestablished under such a scenario.
Even so, today marks the first day in the end of the month buying window that nearly always takes place due to an influx of retirement account money into the market. While new money is being deployed, a great deal of shuffling takes place as funds redistribute their accounts. This should give the market some temporary support. We need to use this opportunity to put together a list of good short set ups. Ideally it would be great to see the broken trend line on the QQQQ (above) be retested near the $39.00 level. If $38.25 breaks first however, all bets are off and shorts should be established at the breakdown point.
Interestingly enough, there were a number of bull flag failures in the gold sector yesterday. The sector still has a chance to hold support, but this development is the first strike against a bullish case.
Bottom Line: We are hoping for a good wash out slide in the market during the month of October. The market has been moving up weakly on poor volume and even poorer breadth. Trade set ups have been failing at a much greater rate than they were during a similar rally last fall. This is a market that needs to shake loose a few cobwebs and a good retest of July’s lows would be a nice way to establish some volatility and increase buying interest once again. The short side has not yet produced a large number of opportunities. However, if the last line of defense on the NASDAQ is broken through we would be willing to bet that downside breadth will be plentiful. This will provide us with reliable set ups on both the downtrend and also good set ups on the following bounce back up. In short, much needed volatility could be reestablished under such a scenario.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment