QQQQ - whew! a "Q continuum" or rally blowoff?

Whew what a day in the markets, and for the QQQQ's! Many will be wondering, is this a continuation of the rally, or is it entering a blowoff phase? Frankly I'd been thinking that the "rounded" shape the rally had been taking on implied more to come, which would typically imply the pullback everyone's been looking for followed by a very nice second leg. Instead the push up today is starting to look more like a peak. Of course, it helps a lot having not only the numbers and pivots from the likes of Andre Gratian and Tony Caldaro, but also the ChartsEdge weekly forecast (and today's daily map) that pointed to more strength early this week. Here are a few points to keep in mind as we cap off this day in the markets and start to look ahead for tomorrow.

One is that some resistance numbers mentioned by those technicians are just a bit higher. The SPX got to Andre's 900, and Tony has mentioned resistance at 912. Another of course is the ChartsEdge weekly forecast which shows the high point for this week on Tuesday for NDX and Wednesday for SPX - see this week's forecast posted this weekend, in this post: What the cycles forecast for the upcoming week in equities and gold: ChartsEdge's weekly forecast (here, 5/2/09). There are various cycles analysts who identify cycle dates this week. And there's also some interesting commentary by Raymond Merriman in his weekend comments (posted here at Raymond Merriman's perspectives on global markets, commodities, and economics (5/1/09); all these folks' sites are listed in the "other sites of interest" at the right side of the page). Not just about some of his cycle dates, but also a fascinating set of remarks about this upcoming time period being one where we should expect "head fakes." Times when the markets will give one signal, but it will be a false signal and that market will do something different. Problem is - even accepting this notion, what do we do with it? How do we discern which signals are false and avoid getting faked out?

My basic thought is to keep trust in the basics that we've been covering all along. But to allow a bit of latitude so that if indicators or some other signals give a quick flash, not to follow it immediately but look for confirmation or verification. Those with souped-up margin accounts can weave in and out of a position quickly. Those working with cash accounts need to slow it down and "measure twice, cut once."

Merriman refers to this tricky time starting Thursday, May 7, but it might be good advice already. Actually, I consider it always a good idea to double-check using a variety of methods - it's part of the philosophy of this site. Don't believe in financial astrology? That's fine, I'm not really sure that I "believe" in it either, but it's always informative to read Merriman's work.

Let's circle this back to the QQQQ's - at upper right is the P&F chart from Stockcharts.com that still shows the resistance line at $35. Actually, it's rather cute how they've got it marked, since the QQQQ's closed just pennies above $35 so the red resistance line is partly broken, but still there. Like a little red cap for the QQQQ! ChartsEdge's weekly cycle forecast showed the Nasdaq 100 (NDX), like the SPX, weaker today but gaining into mid-week. Then their daily map indicated the strength coming in today (though the close was stronger than the map indicated). Did the markets already "do the job" for the forecast strength this week? Will the QQQQ's keep wearing that little red cap (not getting above resistance)? Will the pivots, resistance levels, and trendlines we've been looking at, be met and push the markets into a turn earlier in this week?!

As I mentioned earlier today, from a swing trader's perspective, there can be no "sell trigger" unless price moves (and really, closes) under the low of a preceding day. Of course to be valid, it also has to occur at a significant place such as a trendline, a key Fibonacci target, etc. We may be at or very near these significant places. We'll just have to be a bit patient to see when there's a move (and close) under a prior day low that helps confirm that "the pullback" is probably here.

Is it still possible that there's a new bull market on the way and we get to new highs? I've mentioned that there are two ways that could happen, both unlikely. I stand by that, but I'll provide those scenarios if we see the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite join the Nasdaq 100 and the Dow Transports by pushing to and above their 200-day moving averages. For now - we need to let this week play out. I'll actually be at a golf outing all day Friday. So either something significant happens by or on Thursday or I'll have to review in retrospect this weekend. Meantime, it's day by day!