The Now 15-day Consolidation

The NASDAQ 100 (QQQQ) has spent the better part of the last 15 trading days in a narrow range. I mentioned a week ago that QQQQ had consolidated for 5 days after the mid-July moon shot. We are now is day 15 of this consolidation.

Here is how the consolidation looks on the hourly chart. The Blue lines define the first 5-day consolidation. The Black line is now significant resistance. QQQQ failed to break above it yet again today. You can see how this consolidation has allowed the 20-day average to catch up with price (Red Line). QQQQ hit the Red Line this morning and immediately bounced for over 1% in an hour. I would consider a break above the Black Line to be Bullish, with a stop below $39.


I want to show you a comparison of QQQQ and chart of the Large Cap Growth ETF. You can see that these are very much the same chart. Both are in the midst of some pretty meaningful consolidations. Note how price isn’t breaking down, as it seems that nobody wants to sell here, even with the markets overbought – flip the chart over and it is the crash of last year, where nobody wanted to buy when oversold.


Now here is the chart of the Large Cap Value ETF. This ETF seems to be due for a rest in the very near term. I have recently bought sectors in this Index and avoided much of the Technology exposure of the Growth ETF. These sectors are things like Retail, Financials, Real Estate and Transportation.

I really want to sell some of my holdings in the Transportation ETF (IYT) and roll the money into other areas of Transportation that have recently pulled back – like Fedex (FDX). I may or may not sell IYT, but FDX is catching my attention again.


Retail has broken out above $82 and I would like to see it pull back into the $82 range again. But look at how ARO (Areopostale) has been coiling for about a month, right below the breakout level of $37.50. If Big Money shows up to break ARO, then I am interested in going along for the ride.


There are a ton of areas consolidating and I am hoping to be there when they break out.

Leadership
Financials may be bouncing, but they look like Technology did in the initial bounce of 2003. Leadership this time around has been Technology and Emerging Markets.

There are lots of leaders that have taken a break for a number of days to a number of weeks and I am interested if Big Money shows up to buy them again.


Emerging Markets
Remember how these broke out a few weeks ago? They are now digesting the recent move and I am waiting for the buyers to come back.

Energy
Most of Energy has not yet broken out of its base or has broken out and is now sitting right on top of its base. If money is rotating from sector to sector, then at some point Energy should come into play.


Agriculture


Steel


Gold
Gold is in a 17-month consolidation. In my opinion, it is simply a matter of when Gold works, and not if.


I am overweighted in Gold and Energy. I intentionally avoided Technology after the S&P broke out, confirming the Bull Market. Now, Tech has either paused or pulled back and I am looking for Big Money to stop me in.

I am not recommending anyone buy or sell anything. I am simply going through my thought process. You need to remember that all setups do not work and many that trigger fail miserably. This is a very violent market, and with all of the predatory computers triggering limit orders in Dark Pools, via High Frequency Trading programs, the odds of getting whipsawed are increased to the benefit of the likes of Goldman – and to the detriment of the Average Investor.