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After the close on Friday our mid-term system triggered a sell signal. If you have not switched from long to short positions yet, we would encourage you to do so.
When looking at a chart of QQQQ, you can notice that the ETF has barely broken above its resistance area just below 45. This leads us to believe that there are two possibilities from here. Either QQQQ will continue its uptrend for a while longer before a pullback happens, or the pullback will happen immediately and will be a short and shallow fall. A large decline from here would hurt the recent strength and breakout in QQQQ. As we believe that the uptrend from this summer is still strong, we do not feel that crucial support areas will be broken during this sell signal. This is why we believe a small pullback will happen here or a move higher that will go far enough beyond the closest support levels that the eventual fall would not break those levels and therefore injure our long-term outlook. If the pullback does start immediately, then we believe QQQQ is headed toward the 50 day moving average and 44 horizontal support level.
SMH looks much more bearish. Today will form an outside day and will possibly mark the beginning of the decline to the 34 area at a minimum. We believe it is likely that SMH will fall to 33 this sell signal. If the ETF breaks above last Thursday's high, it is likely that the uptrend has not ended and there will be higher closes before a pullback.
IWM is in a situation quite similar to QQQQ. If IWM does fall from here we believe that it will find support in either the 50 day moving average or the 77 area. A sustained break above today's high and the two month rectangle formation will suggest that there will be continued strength before the mid-term pullback.
Even though we give our subjective view in our commentaries, we advise all subscribers to follow our system and the current signal. Therefore, we would encourage you to initiate your short positions if you have not already done so.
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