By ETF Stocks
The stock market sure could use a set of jumper cables and a full battery to inset a charge into a lifeless Wall Street. Wait, what’s that up the road? Are those flashing lights? Could it be a tow truck in the distance?
Help could be on the way. Not because of any great news from Europe, or a sudden rebound in economic numbers, nah, it’s none of that. The cat has nearly fully compressed on the pavement, and a bounce should be coming soon. Not a roar, but a meow.
ETF Stocks is getting an oversold reading on two accounts and a third may join the party before too long. The number of stocks trading under their 10 day moving average is too numerous, and the NASDAQ, along with the Dow and S&P are trading at dirt low relative strength readings.
It’s the third possibility that’s our trigger to make a move in the week ahead. The NASDAQ is barreling towards its 200-day moving average of 2742. Minus a crisis, the important technical trend line is rarely broken on the first attempt.
With reliable oversold signals lit up, if the NASDAQ can make contact, even intraday, with its 200-day average, ETF Stock believes the timing could be right to pick up some PowerShares QQQ (QQQ), or for the more aggressive, ProShares Ultra QQQ (QLD).
QQQ seeks to track the return of the NASDAQ 100, while QLD intends to double up on the index. For example, if the NASDAQ 100 gains one percent, ProShares Ultra QQQ will gain roughly two percent. Just keep in mind that the flip side is true.
If we get the pivot on the 200 day bull/bear line, then ETF Stocks would expect to see the index make up at least a third of its recent losses, a 50-70 point move. Perhaps even a run to 2900, which will provide stiff resistance.
Investors that ride this idea, should it activate, will be wise to initiate a stop no more than 2% below the 200-day (2690ish), and consider taking profits at 2900 should the index find its way back.
We realize that there are plenty of reasons stocks could crater, Greece, Spain, a rising dollar… but, usually, simplifying to the basics is the way to go. ETF Stocks is cutting through the static noise and trusting our models, because they work; although, we acknowledge nothing is 100%.