Wednesday, December 21, 2011

Nasdaq: Marching to Its Own Drummer

Like many, I have a tendency to think of the S&P 500 and the Nasdaq indexes as marching more or less in lockstep. Sure, sometimes one or the other will miss the beat, but generally they keep pace and rank with the skill of, at the least, a big city high school marching band.

As the markets march up to the year-end holidays, the ranks have grown a bit ragged, and some marchers are tripping over their own feet. For the charts of the S&P 500 (as tracked by the exchanged-traded fund SPY) and the Nasdaq 100 (tracked by QQQ) stand far from each other.

From the long term to the near term, QQQ is marching to the beat of its own drummer.

I  took a detailed look at SPY on Tuesday, concluding that it had broken out of its hourly-chart downtrend and remained within two larger downtrends, on the daily and weekly charts.

QQQ, despite its sharp rise on Tuesday and equally sharp decline on Wednesday, remains within the hour-chart downtrending channel that began Dec. 5. And the tech-heavy index is trading within two broader channels, an uptrending daily-chart trend and a very slightly uptrending weekly chart trend.

In terms of practical trading, QQQ would break below its day-chart uptrending channel at $54.85, and below its hour-chart channel at around $54.

The price would set a near-term lower low at $54.16, and a mid-term lower low at $52.86.

The week-chart channel is so far away as to not be in play at this point, presently running from around $50.25 to $60.40. If the price breaks either of those levels, then the MSNBC crew will be seriously excited.

At this point I'm not trading QQQ. I want to see a breakout, a near-term lower low, before I put money in the game.

Also, we are quickly approaching the point where I drop out of trading for the holidays. Clearly, everyone will be knocking off early on Friday so they can go pick up their turkeys and hams, and the week between Christmas and New Years will be staffed entirely by interns dining on holiday left-overs pressed on them by their loving parents.

So, I'll be watching closely closely tomorrow -- Thursday -- and will scan if SPY establishes a new up channel, but otherwise, not.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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