Why We Shorted the QQQQ

This chart shows why our trading model shorted the Nasdaq 100/QQQQ Wednesday near the highs.



While the other indices remained well off their highs of last week, the Nasdaq 100 was retesting its highs, with strong resistance keeping it from breaking out. One of the best technical sell indicators is a failed buy signal. This 15-minute chart of QQQQ shows the clear bullish cup & handle pattern that failed to break out. This market has been extremely resilient, but normally this setup at the highs would signal more downside ahead.

Comments

[maximummarket:]

This market is rigged. Over 600 points in this "rally" has been from peculiar extended hours volume. You can manipulate the futures with a minimal amount of contracts int he after hours. I can't tell you how many short plays I have seen in the last 3 weeks that got squeezed out. Don't expect the markets to be down for long, the government and the financial oligarchs are long the market.

Apr 23 12:12 PM

[DaveW:]

Maximummarket, I am very disappointed to say that you are probably right... Our own gov-oligarchs has made the PPT Theory (the 'Area 51' of the market) more a reality than ever.
I'll be even more disappointed if the quack above (Cetin or Ned or whatever his name is) proves to be right!

Apr 23 12:58 PM

[RiskReturnO...:]

Good analysis. I'm waiting for one more good news (AMZN earnings) to get out of the way, and then if that doesn't break the $33.5 on the QQQQ, then I don't know what will. Next leg will likely be down.

However, since tech has been a leadership group YTD, any breakdown in leadership sector will likely cause the overall market to drop more. Would be short on SPY be more profitable?

Apr 23 01:06 PM

[Jasper M:]

Tech is likely the next Big shoe, after financials. Their business cycle requires constant reinvestment, as last year's stuff is a doorstop. Only those firms with oodles of cash, to finance Themselves, have a chance at doing well.
Cetin, large cap means just that, requiring lots of purchasing power to keep the price up that high. Where will that come from as the money supply shrinks? The one thing the feds, and their bankster facilitators will likely not bail out is other people's stock prices.

Apr 23 03:31 PM

[cyclingscholar:]

Can you expand the comment, and address the issue of how substantial the resistance level at 33.50 in Q's is? Bounced off it violently several times in the last few days.

Apr 23 03:55 PM

[George Kesa...:]

TIme to cover!!!

Apr 23 03:55 PM

[schlumpf:]

they do it when JAPAN is finished.
When Obama. Geithner, Bernanke speaks.
And in the last 20 min. US trade.


On Apr 23 12:12 PM maximummarket wrote:

> This market is rigged. Over 600 points in this "rally" has been from
> peculiar extended hours volume. You can manipulate the futures with
> a minimal amount of contracts int he after hours. I can't tell you
> how many short plays I have seen in the last 3 weeks that got squeezed
> out. Don't expect the markets to be down for long, the government
> and the financial oligarchs are long the market.

Apr 23 04:21 PM

[dcb:]

very strong rigged trade started today at about 3;30. you could see the programs get turned on.

Cetin, I'm afraid once more you are incorrect about tech in the business cycle. banking leads way out, then followed by tech. last in the cycle is energy, then right before that is materials. my guess is that industrials is in middle, but don't remember.

Apr 23 04:43 PM

[dcb:]

cetin order is:
from end of contraction: financials, then tech, expansion: consumer disc, materials, industrials, then energy into contraction: health care then staples, then utilities then to financials again

from Pg. 376 essentials of investments by Bodie, Kane, and Marcus

Apr 23 04:48 PM

[Eric in IL:]

I agree with the author. While it pains me to be bearish, I think QQQQ is set for a significant pullback. Did you see AAPL today? Completely flat after the open.
I don't know or care about conspiracy theories, but I could see Nasdaq composite pulling back to 1450.

Apr 23 06:18 PM

[tunaman4u2:]

Inclinations are clearly to short but as opposed to the beginning of March people are scared to death of shorting against sudden government intervention, hiding facts that would bring the market up & cooking the books to make things look good.
Hard to short when things are so stacked against it.

Agree with your thoughts which is why the market is stuck at 8K, buying with this much optimism about is the wrong play.

Apr 23 06:23 PM

[The Geoffster:]

Let's see... Chrysler bankruptcy, GM bankruptcy, CRE collapse, regional bank failures, unfunded pension liabilities, municipal bond defaults... Looks like a great time to get back in the market!

Apr 23 07:36 PM

[Roger Knights:]

"wall o worry" ...

... Said Humpty Dumpty

Apr 23 08:36 PM

[themackattack:]

What is the point of this Thumbs Down button if someone accruing 1000 Thumbs Down points doesn't get permanently silenced/muted?? (and you know whom I speak of)

Apr 23 09:50 PM

[No Free Cake:]

Fundamentals ... we don't care about no stinkin' fundamentals ... buy, buy, buy

(tongue firmly in cheek)

On Apr 23 07:36 PM The Geoffster wrote:
> Let's see... Chrysler bankruptcy, GM bankruptcy, CRE collapse, regional bank failures, unfunded pension liabilities, municipal bond defaults...

> Looks like a great time to get back in the market!

Apr 23 11:25 PM

[dcb:]

He doesn't tell you that he was advocating google as a buy at 1000 at the peak of the market. I can go around calling the bottom and eventually I will get it right. But of course he is so smart. I don't know if he has changed his blog since I looked at it, but each bounce is a "new" bull market and a return to the goldilocks economy. I will add that he makes a point that he plans to advertise his blog by posting on free sites such as this. I would ask if he is such a great investor how come he has to use free sites to promote himself. You would think such an expert could afford to advertise.


On Apr 23 08:36 PM Roger Knights wrote:

> "wall o worry" ...
>
> ... Said Humpty Dumpty

Apr 24 08:15 AM

[dcb:]

I am not sure you cans
short the market if you don't have much volume. if the volume you can put in play is less than institutions such as Goldman that are keeping it up I don't think there is much you can do. Therefore, the default way the market may only be able to move at this point is up.

I don't know enough about markets to say that I am correct, so if someone could comment I would appreciate it.

An aside the head of the NYSE mentioned that the market at this time is not likely to maintain the gains because it is "low volume" Could the same logic apply to shorting? i.e. you can effectively short either. It would also explain why charting hasn't been that great for me?

Apr 24 08:21 AM