The QQQQ is forming a new falling channel

The Stock Market Week - 6/27/2008

All the major US indices were negative. The Dow Jones Industrial Average was the weakest among the major market indices. It closed on Friday at the lowest level since September 7, 2006. For the week the Dow Jones Industrial Average dropped 496.18 points, or 4.19%. The Standard Poor's 500 Index dropped 39.55 points, or 3.00%, while the Nasdaq Composite dropped 90.46 points, or 3.76%. The Energy sector was the strongest sector last week followed by the Health Care sector. The Financial sector was the worst performing sector of the week followed by the Industrial sector. The Conglomerates and Financial are the most oversold sectors, while Regional-Southeast Banks, Sporting Goods, Housewares Accessories, and Appliances are among the most oversold industries. The Basic Materials and Utilities are the most overvalued sectors, while Beverages-Brewers, Gas Utilities, Metals Fabrication, and Oil Gas Drilling/Explore are among the most overvalued industries.

Nasdaq Trend Analysis

In our previous QQQQ analysis on June 20th, we suggested that "the weekly Lane's Stochastic falls below 80% level, and %K line falls below %D. Both signs are usually considered as a sell signal". It was a negative week for the QQQQ. The QQQQ lost 3.73% for the week.

QQQQ Long-term technical analysis: Our long-term outlook has not changed. We consider two possible scenarios: Scenario 1. The long-term uptrend (10/08/2002 - 10/31/2007) is over, and a new long-term downtrend started on 10/31/2007. The sub wave 2 (0/31/2007 - present) is currently in progress and almost completed. The sub wave 3 down should start soon and break the long-term support trend line around 43ᇀ, and then it'll go lower than the recent low of 41.05 and move down to about 35 in the late fall. Scenario 2. The long-term uptrend that started on 10/08/2002 is still in progress, with sub wave 5 currently in progress. The wave 5 is usually tricky. It might be truncated and form a double top pattern or not even reach the previous high - 55.07. Which scenario we are going to see may depend on how successful the FED's rate cut would be. The FED's market regulation supposed to weaken the upcoming recession, but FED should not use their power to turn the recession into a new bull market. If FED overdoes the rate cut, we may see the scenario 2. With this scenario, by the end of the wave 5 FED will not have enough room for a new rate cut, and the next long-term downtrend would be even more severe. "This will probably not prove to be the final bottom" said billionaire George Soros, referring to the rally in stocks after JPMorgan Chase agreed to buy Bear Stearns on March 17. He added that the rebound might last six weeks to three months as the US moves closer to a recession.

QQQQ - Long-Term Trend

QQQQ Short-term technical analysis: Weekly rising channel (March 17 – June 5) is broken. The new falling channel is forming, and the price is near the channel support. Daily William's Percentage Range (W%R) and Lane's Stochastic (%D-Slow) are oversold. Broad market is oversold on daily and weekly bases. 133 members of Standard Poor's 500 Index are oversold, while only 4 overbought. The sharp decline might pause soon, and QQQQ may move up toward the weekly falling channel resistance. The next QQQQ long-term support is near 44.

QQQQ - Short-Term Trend

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