|
The stock market is very close to being overbought. When we ran our mid-term system the last three trading days, we were quite close to a sell signal. For this reason, we feel it is quite possible that the stock market will push higher before a pullback. The volume in QQQQ and IWM has decreased the last three trading days. This suggests that a short-term pullback could begin tomorrow. As our system is near overbought, we feel it is more likely that the market will push higher and trigger a sell signal.
You can see from our first chart of QQQQ that the ETF has not hit our resistance level of 42 yet. It is also at the upper end of the trend channel that started in September. If the ETF pushes to 42 tomorrow, our system will most likely trigger a sell signal. If we start a short-term pullback tomorrow, we feel that the Qs should get to 2006 highs before a sell signal occurs. Basically, the short-term pullback would relieve part of the overbought condition and allow the ETF to travel to the 43 area.
SMH has a large amount of resistance in the 35 area. Horizontal resistance from March, May, and September of 2006 and the 200 day moving average. If QQQQ does move to 42 tomorrow, we believe that SMH will top in the 35 area for now. If we get the short-term pullback, it is quite possible that SMH will be able to break 35 this buy signal.
The final chart is of IWM. Our recent resistance level has been broken and IWM is most likely on its way to the 74.80-75.00 area. Future resistance is at the 76 and 77 level.
If we start a short-term pullback tomorrow, the indices should be able to move much higher this buy signal. If the rally continues, our system will most likely trigger a sell signal after tomorrow's close.
|
