Securities Research Services

Wednesday, November 15, 2006

QQQQ Has Room to Move

The market followed through higher yesterday. Of particular interest is the fact that the semi conductors and small caps broke out. Certainly this rally is nearing its end stages. Nevertheless, the trend is still up and top calling has been killing the speculators for months now. We think we have some insight into where this market may be headed over the next few weeks. The QQQQ seems to be providing clues to those paying attention. First, yesterday's rally put the QQQQ back at overhead channel resistance. The S&P and Dow both have some room to move, but the QQQQ at the very least needs to correct by trading sideways for a few days in order to maintain the parameters of the trend that has been in place since August.

From the chart above you can see that the immediate trend doesn't have much more room to spare before a correction takes place. Panning back to a 5-year view however note that the QQQQ is gunning for its overhead channel resistance. Sine 2004 the channel top drawn on the chart below has been turning back the QQQQ. Over the coming weeks this resistance area of $45.50 should act as a price magnet. What happens after the QQQQ reaches this area is anyone's best guess. It is interesting to note, however, that the S&P and Dow have both taken out their overhead channel resistance and are continuing higher. It's too early to know if this has any real significance. For now though, the trend remains friendly to bulls.

No comments: