QLD Trade Entry and Market Update

Click on Chart to Enlarge

The limit order of 19.72 for QLD was triggered today for the next blog trade. The short-term model became very oversold early this week and I had said that I was not interested in getting into a bullish trade at that point. However, I felt that if the market made new lows that would set up a better trade.

The short-term model is now basically showing a bullish divergence as the markets have moved lower from earlier this week, but the model has not even quite made it back to oversold. That is potentially good or bad for our trade...bad because the model is not at an extreme oversold condition meaning some more downside may be reasonable....but good because the strongest signals from this model tend to come on divergence between price and the indicator like the present one.

The chart above is the Nasdaq which as you can now see has made new lows below the November lows. The chart for QLD looks very similar and the limit order I suggested corresponded to the November lows. Now that the Dow, S&P, and Nasdaq are all beneath the November lows, I think the probabilities are increased for a strong multi-day advance.

Click on Chart to Enlarge

This chart is a 60 min chart of SPY and is currently showing a nice bullish technical divergence on the MACD and RSI indicators. However, there has really been no confirmation to the upside yet. I still feel it is most likely that the S&P will fall down toward the 660 area before the next rally attempt. Whatever downside is left, my guess is that it will happen quickly.


Hopefully any drawdown is not too uncomfortable on this trade. This trade is a "bottom picking" type trade which goes against the larger trend. The trade has very explosive potential, but also a higher than normal chance of significant intra-trade drawdown than the trades I normally recommend. So now we just await the next overbought extreme on the short-term model for our trade exit.




Pete