QQQ weekly update, when will the selloff end?!
Updated
Sorry about the messy chart, but I will try to explain my thought process when looking about where we are headed.
If you go back and watch our videos/updates from the past couple of weeks, our consistent target has been 330 for the QQQ. We went above that, and I said that the optional target now is 350, in the event the rally continues. We put a top in around 338 and then the selling began and so far, we have not been able to find and confirmation of a bottom in place, or some type of bounce to confirm we are headed back up.
In terms of the technicals, we said that 270 was the "primary" target, but imo that is too far down considering the market psychology. Everyone is going full bearish, and saying we are going to repeat the March drop, therefore I don't personally think this is a high probability (just a reminder, not investing advise). On the top of the target box is 300, which is currently where we are sitting at. I hope that somewhere within this region we can expect a turnaround and begin our wave 3 off the March lows. Additionally, MACD is showing some positive div, so that is definitely a pro for a case to the upside.
Reasoning for adjusting the top of wave 5 to 338, is that if you look at the chart, we have broken below the wave 3 high, meaning that most likely the 5 wave cycle has now been completed and we are in the corrective phase. So that means that our BIG wave 1 off the March lows is now complete, and we are in BIG wave 2.
Considering that the next leg up will be a BIG wave 3, the move will be fairly straight forward to around 550+ on the QQQ. In terms of trading, there is not much action, unlike the wave 1-2, where technical analysis was required to navigate. Long term expectations (meaning over the next 5+ years), I am overall bullish on America, with more emphasis on emerging markets. I think history tends to repeat itself, when we look back at WW1 and the Spanish Flu, the trauma that was induced produced one of the most productive and prosperous times during American history. With that being said, I do not believe that megacaps are the way to play this, personally I am going very heavy into growth names, and small caps. Upside potential on stocks that have been beaten down is alot greater than your standard FAANG names, but again, just my opinion. Additionally, FAANG is kinda overvalued, and most people will not be as tempted to buy at such high levels, whereas some stocks that have already been destroyed, people will be less frightened to put money into them (in terms of overall downside potential).
For recovery stocks, my favorites have consistently been AMC, and BBW. AMC is good fundamentally because of the balance sheet clear up, so nothing too much to worry about in terms of bankruptcy. Additionally I am a HUGE fan of DIS, especially as a recovery stock play. What they have been doing with Disney+ has also been great, and they are definitely becoming a real threat to Netflix's empire. Airline and Cruise Lines are also fine imo, but Airlines charts look slightly better, as cruises will take more time to "return to normalcy". Airlines are also required just for general travel purposes, and are not necessarily dependent on people going on vacation.
In terms of the next correction we can see in the market, we will have a wave 4 after this next rally up, but again, I do not expect that until we reach above 550. Wave 4s are also not as "violent", so to say, for perspective, think of the 2018 selloff. As we inch closer to the wave 5, things become a little more tricky, and should be taken with caution. Potential for larger corrections as we get closer to the year 2030. Not saying we might have another great depression, but also not saying we will not have another great depression.
I hope this clarifies my overall opinions, let me know if you have any questions.
If you go back and watch our videos/updates from the past couple of weeks, our consistent target has been 330 for the QQQ. We went above that, and I said that the optional target now is 350, in the event the rally continues. We put a top in around 338 and then the selling began and so far, we have not been able to find and confirmation of a bottom in place, or some type of bounce to confirm we are headed back up.
In terms of the technicals, we said that 270 was the "primary" target, but imo that is too far down considering the market psychology. Everyone is going full bearish, and saying we are going to repeat the March drop, therefore I don't personally think this is a high probability (just a reminder, not investing advise). On the top of the target box is 300, which is currently where we are sitting at. I hope that somewhere within this region we can expect a turnaround and begin our wave 3 off the March lows. Additionally, MACD is showing some positive div, so that is definitely a pro for a case to the upside.
Reasoning for adjusting the top of wave 5 to 338, is that if you look at the chart, we have broken below the wave 3 high, meaning that most likely the 5 wave cycle has now been completed and we are in the corrective phase. So that means that our BIG wave 1 off the March lows is now complete, and we are in BIG wave 2.
Considering that the next leg up will be a BIG wave 3, the move will be fairly straight forward to around 550+ on the QQQ. In terms of trading, there is not much action, unlike the wave 1-2, where technical analysis was required to navigate. Long term expectations (meaning over the next 5+ years), I am overall bullish on America, with more emphasis on emerging markets. I think history tends to repeat itself, when we look back at WW1 and the Spanish Flu, the trauma that was induced produced one of the most productive and prosperous times during American history. With that being said, I do not believe that megacaps are the way to play this, personally I am going very heavy into growth names, and small caps. Upside potential on stocks that have been beaten down is alot greater than your standard FAANG names, but again, just my opinion. Additionally, FAANG is kinda overvalued, and most people will not be as tempted to buy at such high levels, whereas some stocks that have already been destroyed, people will be less frightened to put money into them (in terms of overall downside potential).
For recovery stocks, my favorites have consistently been AMC, and BBW. AMC is good fundamentally because of the balance sheet clear up, so nothing too much to worry about in terms of bankruptcy. Additionally I am a HUGE fan of DIS, especially as a recovery stock play. What they have been doing with Disney+ has also been great, and they are definitely becoming a real threat to Netflix's empire. Airline and Cruise Lines are also fine imo, but Airlines charts look slightly better, as cruises will take more time to "return to normalcy". Airlines are also required just for general travel purposes, and are not necessarily dependent on people going on vacation.
In terms of the next correction we can see in the market, we will have a wave 4 after this next rally up, but again, I do not expect that until we reach above 550. Wave 4s are also not as "violent", so to say, for perspective, think of the 2018 selloff. As we inch closer to the wave 5, things become a little more tricky, and should be taken with caution. Potential for larger corrections as we get closer to the year 2030. Not saying we might have another great depression, but also not saying we will not have another great depression.
I hope this clarifies my overall opinions, let me know if you have any questions.
Note
Another possible interpretation, is that this is just the A wave down, we get a B wave bounce into the summer, and then get one more leg down to complete a full ABC correction. By this logic, this could take us down in to 270 in the C wave of the wave 2, so this is another possibility to be mindful of in the future. The only confirmation that we are potentially done with a wave 2 pullback will be EXCEEDING the previous peak, otherwise, this is an interpretation that should be considered.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.