3/24/2018 Review of Indexes (Weekly Perspective)

Fun Fact #9

Did you know that when you short sell a stock after the company pays a dividend, you owe that dividend money back to the owner of the shares you borrowed?

Why do you think that is? Hint: The term starts with the letters “Arb.”

Additional hint if you are still stuck: Yesterday’s post will help you answer this question. 


 

Hello readers! Today I will be looking at the market indexes like I promised at the end of each week. 

I mentioned in an earlier post that the indexes (especially the Dow Jones and the S&P500) would likely retest the February lows. It turns out that the Dow Jones and S&P500 already dropped to the February low levels on Friday. The Nasdaq (QQQ) is still far from the February lows.

Below are the weekly charts of QQQ, SPY, and DIA:

 

QQQ weekly 3_24_2018.PNG

What’s concerning about the weekly QQQ chart is that we’ve broken below the weekly trend channel. I mentioned last week that we need to hold the 160 level to stay within the channel. Notice that in February, we also broke through the trend channel but quickly rebounded to close within the channel. This time, buyers are not buying up this dip as aggressively. 

I see two possibilities in the next month. Since I believe volatility will still be high, we will either violently drop down to the 135-145 level, or we quickly reverse back up to the 170-178 levels. I’m banking on the move up, but I’ve got a put to protect me if I’m wrong.

DIA weekly 3_24_2018

 

SPY weekly 3_23_2018

The DIA and SPY charts look similar to QQQ.

On the weekly chart for the indexes, this is either a double bottom pattern, or we drop violently downwards into bear market territory (drop of 20% or more from the peak). 

If we drop, the next weekly support levels for the indexes are:

QQQ: 135-145

DIA: 210-220

SPY: 238-245

Tomorrow I will be looking at the FAANG stocks in more depth, and maybe Alibaba (BABA). 

Have a great weekend!

 

 

 

 

 

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