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The stock market has started its descent. As QQQQ and IWM continued to rise after our system triggered a sell signal, it is likely that they will end this signal with a tiny loss or gain. SMH should end with a moderate gain. With the market being as powerful as it is right now, we can only expect a few more percent down before a buy signal is issued.
On our chart of QQQQ we have placed blue Fibonacci retracements to give a possible target for this sell signal. If last Thursday's low was the halfway point of this decline, we can expect the ETF to fall to around 50.60 before the downtrend is complete. You can see from the chart that 50.60 correlates with our first horizontal support level. As this was the breakout point into new 2007 highs, it is the likely end to this decline.
SMH should fall to the 35 level this sell signal. It is possible that the ETF could push lower to 34, but we find it unlikely. A move down to 34 would suggest that a break of that level is likely and we do not see SMH being in the middle of a long-term downtrend.
Our target for IWM is 80. This was the breakout point from the double bottom formation and if this is where the downtrend ends, we are currently halfway though the sell signal, which we believe is accurate.
The only issue with the stock market having a rather small pullback here is that both of the recent down days for QQQQ have been outside days. Meaning, the low was below the previous low and the high was above the previous day's high. This would suggest to us that there will be further downside, but this is the only support for a larger correction right now. Even though we have given possible targets for the ETFs we follow, in the end our objective system tells us where to trigger a buy. This buy could occur earlier or later than anticipated.
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