PowerShares QQQ Trust Series 1 ETF Forming A Massive Head and Shoulders

The PowerShares QQQ Trust Series 1 ETF monthly chart is quite an amazing sight to behold.  I just did a post about how the current market structure could be similar to that of the mid 1970’s time frame and could potentially evolve bullishly instead of bearishly.

If you look at the long term monthly chart of the the PowerShares QQQ Trust Series 1 ETF the argument could be made that it is forming a very large head and shoulders bottom formation and is in the process of forming the right shoulder.  If true then it could evolve into a breakout scenario above the neckline and lead to an eventual price move towards the 65 range.

Similar to the sp500, the PowerShares QQQ Trust Series 1 ETF has so far only done a .382 fibonacci retracement of the entire rally that began from March 2009.  This could imply internal strength in the market ( so far at least).  A break below the 41 level would invalidate this pattern and destroy the symmetry of it and show that the bullish mid 1970’s scenario is not workable.  But for now the structures and setup seems to have good potential.

qqqq20100708

The neckline that is shown in the chart above was also a very logical point for the recent correction to start as it was right at previous resistance.  So for 2 to 3 months we have corrected off that level and now if we head back up to the neckline we could get an explosive topside breakout.  This is going to be a very important chart to keep an eye on in the days/ weeks ahead.

Posted in Index Trading, Long Term Charts, Long Term Trading, Market Timing
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2 comments on “PowerShares QQQ Trust Series 1 ETF Forming A Massive Head and Shoulders
  1. Geoff says:

    Tom

    My point of view is largely formed via my fundamental perceptions of the future. Unless, we are very suddenly headed into an ever rising inflationary cycle, i do not think we are about to embark on a new bullish phase. At best, i think we are range bound between maybe S & P 1000 to 1150.

    I think the it is more logical to think the markets deserve to be 10% to 20 % lower from here. There are too many risks and headwinds: (1) tougher earnings comparisons going forward, (2) November elections, (3) governmental uncertainties – healthcare, finreg, captrade, tax levels expiring at the end of this calendar year, immigration, unemployment, temporary cessation of offshore drilling. Barron’s has touted the high levels of cash held by US corporations but (a) where is the cash – – how much is offshore and subject to taxation if brought back to USA and (b) with the high level of uncertainty companies probably want to hold onto what they have, e.g. Microsoft. Altho, i admit that IF corporate America decides to pay special dividends (possibly before yearend in order to beat the threat of higher taxes on dividends) than that might “goose” the market – – but it would be a one time wonder – – but it could be potent temporarily.

    Unless the current Administration radically and convincingly changes its spots, I think the level of uncertainty is very high and is leading to a sort of paralysis – – this could lead to a declining economy which is even more dangerous now because the Government has almost no weapons left in its arsenal. By the way, I am a lifelong Democrat.

    Thanks for your posts. They provoke thought.

    (Note: While you indicate that QQQQ may be forming a reverse H & S, I agree it looks like that pattern. But Apple represents 20% of Nasdaq 100, and the handheld space is becoming very crowded with very very big players. Many commentators are saying that tech is the place to be, but personally, i am somewhat skeptical about the future.)

  2. Tom Tom says:

    Good points Geoff. I suppose this earnings season and the next one as well may ultimately decide the true direction. 10 to 20% lower from here seems reasonable to me as well though I have a strange feeling that market will not be able to break 1010.91 or maybe it will do a double bottom off of that level. Since you are interested in the fundamental side as you point out you might be interested in reading Marty Armstrong material. He might be the smartest economist out there. It is a lot of material though. I remember him saying something about how stocks would actually go up in a debt deflation which I thought did not make any sense at all. Anyway take a look if your interested. http://www.scribd.com/kzuur58

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