In retrospect it looks as if the mid-term bottom was in the beginning of November. The pullback was extremely mild from the end of October to November and therefore did not trigger a buy signal in our system.

In retrospect it looks as if the mid-term bottom was in the beginning of November. The pullback was extremely mild from the end of October to November and therefore did not trigger a buy signal in our system. If we had allowed for such mild pullbacks to produce buy signals, our overall results would be hurt significantly. Unfortunately, overbought conditions (which produce sell signals in our system) do not always lead to oversold conditions. Sometimes the market continues to rally despite being so overbought. This is what has happened recently. In retrospect we would not have changed anything in our system. In the past, overbought markets have continued to become overbought at times, but we have found that in the long run your results are much greater if you sell (or short) into these overbought conditions.

The first chart is of QQQQ. You can see how the past four days have created a small base in the ETF. We are also approaching the lower end of the uptrend line from the beginning of September. If QQQQ breaks the 44 area, we should at least see a fall to 43.

SMH has seemed to invalidate its head and shoulder formation, but it still possible that a double top is forming. The first top was in the middle of October. The high on the first top combined with the strong resistance at 36 should push SMH lower. We could still see a fall to the 33.40 area this sell signal.

IWM broke our 77 resistance and has subsequently moved to all-time highs. We would certainly expect for the ETF to at least move back to its breakout point of 77. A fall into the 50 day moving average this sell signal would also be possible.