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A little morning TA

Posted By Mike On Aug 13, 2009 @ 5:23 am In charts, technicals | 10 Comments

2-year view of QQQQ here (Nasdaq 100 ETF):

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Image: Interactive Brokers

Red: Trendline from 10/07 peak across June and Sept 08 peaks.

Light blue (nice fit): [2] rising broadening wedge

Dark blue (maybe a stretch here): [3] rising tightening wedge

White: Declining volume since start of rally, an unambiguous warning not to trust it.

Hat tip to Jim at slopeofhope.com for noticing the wedges.

As for the failed head and shoulders pattern that we saw a few weeks ago, Edwards and Magee had this to say (Technical Analysis of Stock Trends, 9th ed., p62):

There is one thing that can be said and is worth noting about Head-and-Shoulders Formations that fail completion or produce false confirmations. Such developments almost never occur in the early stages of a Primary Advance. A Head-and-Shoulders that does not “work” is a warning that, even though there is still some life in the situation, a genuine turn is near. The next time something in the nature of a Reversal Pattern begins to appear on the charts it is apt to be final.

And without comment, here’s the 2-year view of the S&P vs. the 20-day average Equity Put/Call ratio:

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indexindicators.com

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[1] Image: http://sovereignspeculator.com/wp-content/uploads/2009/08/120809-qqqq-2yr2.gif
[2] rising broadening wedge: http://thepatternsite.com/abw.html
[3] rising tightening wedge : http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:rising_wedge_re
versa

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