Tag Archives: QQQ

Hard to be contrarian?

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Yes, emotionally it comes difficult to most people, including traders to go against the prevailing opinion.

I go back to the 2005 or so when I went to visit Arizona with the intent to invest in another property. Real-estate was hot. Everybody wanted to be “in”.

The problem is we never learn from history. Either because when it repeats it hits a new group of participants or we have short memory or both.

What did I see when my agent took me property shopping? I saw increased density of new housing (huge houses on small lots – were they running short on desert sand?), waiting lists of potential buyers paying above asking price, multiple bids without even seeing a property, creative financing (cheap at first glance).

I am not a real-estate expert now, and was even less in 2005, but what I saw was not logical….

We decided not to invest more at that time. The math was not working for us. For few more years the boom seemed to continue and my feelings of “I missed” the market and investment were strong.

Why I mention it now? Just to keep myself in line and remind that it is just a matter of time in every market: stocks, real-estate, whatever else, that reality will be verified.

What defines the value? For the stock market many investors/traders use various formulas, one common is P/E. AMZN P/E is 138.67, AAPL P/E 16.31, GOOG P/E 18.03

Seriously, could I base my investment decision on such “imprecise” number? How would I know the true detail behind the calculation of earnings? How would anybody predict the future of a company? For me this is as good as guessing.

What is there for me to decide on my trades – the near future that I can access by looking at the charts and current “chemistry” of the markets?

The longer term charts tell me that we still may have some room for the move up. However I do not want to get blinded when the crowd pushes up and a resistance looms ahead.

15 year monthly charts still look OK, with QQQ potentially having much more room but scary at the same time. Please remember QQQ values from 2000 were the same “quality” as housing at the peak!

QQQ 15 Year Monthly Chart

SPY 15 Year Monthly Chart

In the meantime I am just looking for shorter term opportunities and take gains when I have them.

Eva

Next winner: Weekly or Daily

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What should guide the trades this week?

Some ETFs I track show H&S on weekly charts (EEM, EWC, XME). These H&S started when the market took off in July 2009.

See weekly chart of EEM: left shoulder top around $44 in January and April of 2010, head around $50. Now approaching $44 – is that right shoulder or just a stop on the way toward $50 within a triangle?

Daily chart of EEM shows base building with resistance at $44. EEM currently testing SMA(20) and above SMA(200). SMA(20) and SMA(50) pointing up already. MACD positive but topping.

SPY already broke out from a similar base on the daily in January 2012. DIA, IWM, MDY, QQQ look similar or better.

Are ETFs like EEM, EWC, XME going to break down while the market keeps moving up? I doubt it. Either these ETFs should improve while market moves up, or they are flashing a warning sign for all of us.

As for my trading: I stay focused and disciplined, and trade what comes available with good setups (see my blogs from last year).

Eva

Is Tech a “Safe Haven”?

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European mess, US budget struggle, and more have not impacted all market areas evenly. While we are preoccupied with negative news, tech has been recovering better than SPY.

QQQ:SPY Weekly Chart

Is it because we can still get convinced that tech deserves high P/E? Even P/E of 100 doesn’t look scary and we can come up with all wonderful explanations of the phenomenal prospects of the company.

Is it because even in hard times we still need and can afford gadgets and toys?

Is it because of innovation accelerating the demand from other industries for automation?

Whatever it is, the positive trend is still there. QQQ recovered much faster than SPY and is already trading above the high of 2007.

QQQ Weekly

Please review my recent blogs for more charts. They are still trading within latest patterns.

Traders Fatigue

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Is that wishful thinking or I am just getting tired watching these dramatic market moves? I just reviewed some of the major 5 years weekly charts and I do NOT see a confirmed downtrend yet.

SPY looks like it is retesting the breakout of last November from bullish inverse H&S, “tilted to the right”. It is quite possible that the test will not hold at the right tilted neckline (currently around $115) and we will see a pattern of new bearish H&S with a neckline at around $100 being tested. This would be a bearish development that would finally lead to confirming for me the downtrend on the weekly chart.

The other market ETFs look similar IWM, MDY, QQQ with the latter looking the best. However they have a common problem: MACD is weakening.

The trades from 10 day hourly chart were finally working last week (see my previous blogs for the setups).

Being a disciplined trader myself I do not have to trade every day – and I don’t. But being a trader – I would like to start getting more “traction” in my trades. Without solid setups beyond 10 days it’s hard to commit bigger capital.

So back to watching the market and improving my work!

What about daily charts? Take SPY – at support of longer term, consolidating but not giving up yet, with MACD trying to fight the bottom, it may have a chance to test SMA(50) and $125 resistance.

Currently there is no solid entry point with good risk reward ratio. SPY closed at $117.97. Support at $110 and resistance at $121.5 – too much risk.

I like to enter trades when everybody is running away. And I did, when SPY was testing $110 on 8-18 (I used MDY). Part of the trade still has to work.

Eva

The ducks keep coming

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I am running out of “bread” and the “ducks” keep coming. The market keeps pushing higher even though many expect it to finally drop. But it doesn’t. There are still too many market participants that are not “IN” and too many that are trying to “Pick the Top”. Market always goes farther than we expect it too, either on the way up or down.

Why? I have heard many explanations. It’s hard to tell if in the era with lots of trading volume coming from computer trading that the main reason is trader psychology. However I think it is so.

Think about your trading. When do you feel it’s safe to buy? How do you decide to stay in the trade? When do you decide to take profits and do you actually execute it? Are you shorting at the “top”? How do you setup your exits? Do you execute your exits?

The ducks keep taking the bread and new ducks are joining them. Part of it is that some ducks are just really, really hungry, some just love to eat and there are also new ones that just got the news about the bread!

Who is currently hurting the most – the shorts. Who is currently happy – the longs. Are the shorts ready to “throw in the towel”? Are we close to the shorts capitulation? Once that happens, the probability of the pullback will increase.

Check the 5 year weekly charts: IWM, MDY, SPY, QQQ.

IWM 5 Year Weekly Chart

MDY 5 Year Weekly Chart

SPY 5 Year Weekly Chart

QQQ 5 Year Weekly Chart

MDY and QQQ are trading above their highs of 2007 and tested the respective support this March. Is one test enough? Maybe not – MACD slowed down.

IWM is trying to poke above the high of 2007. SPY is still about 20 points below its 2007 high…

One of my rules that keep me out of trouble: take profits on the trade that I feel happy about. This rule never failed me. One may ask: don’t you worry that the trade you exit would keep pushing and you could have made more money?

I never worry about not making more. I do worry when I mess up and loose money.

There is always another time, there is always another setup. A trader makes money on the difference between the entry and the exit. Keep looking for another proper entry.

Eva