A Significant Summer Correction May Be Ahead For The Markets And ETFs
“There is an old Wall Street adage: Sell in May and go away. It suggests that markets perform better over the winter season, and that investors are smart to sell off over the summer. There have been numerous studies over the years concerning this phenomenon. No one knows for certain why it has held true over time. Some suggest vacations, or lack or conferences; perhaps it has something to do with year-end bonus cycles or Federal budgets. Here is a detailed chart that goes across borders and time and shows that the theory is true,” Christian A. DeHaemer Reports From Energy And Capital.
DeHaemer goes on to say, “Of course, this theory would have been a moot point for 2009. If you sold in May of last year, you would have missed out on one of the strongest rallies in history. The PowerShares QQQ (NASDAQ: QQQQ), which tracks the NASDAQ 100, is up 43% since May of 2009. But this isn’t last year. Everything has changed in 2010. Last year, we were bouncing back from one of the biggest sell-offs since the 1930s. The fear was so thick, you could eat it. No one wanted to own stocks; in March of 2009, there was no one left to sell. It was a clear market bottom capitulation. This year, we’ve had a monster run for two and a half months. The stochastic is riding the ceiling… The MACD seems topped out… And we are running into several points of major resistance that go back to 1998.”
“Markets don’t go straight up; earnings season is almost over, and though it was positive on the whole, the good news has been priced in. The stock market is a leading indicator. It rallied over the last year with the understanding that the recession was ending. Year-over-year numbers have been good because in Q1 2009, they were horrible. The positive earnings numbers have a lot to do with a low hurdle. But today, if you look out six to nine months, what do you see? More Wall Street blame and regulation, higher taxes, more government debt, Cap and Trade burdens, Euro debt contagion, increased protectionism, unresolved housing forecloses, climbing interest rates, and a contentious mid-term election in November. It is true that Wall Street climbs a wall of worry. And the bullish case involves the Federal Reserves keeping interest rates near zero, which in turn creates enough liquidity to inflate another bubble. But anyone over the age of 30 has seen this movie before — twice,” DeHaemer Reports.
PowerShares QQQ (NASDAQ:QQQQ) PUTS
“Above is a ten-year chart of the NASDAQ 100 tracking stock. Each candlestick represents a quarter, or three months. You’ll notice a couple of things: One is that most up-trends last five candlesticks, and we are now at six on the current market rally. Furthermore, there is significant resistance at 50.65 going back to 2007, 2000, and 1999. And check out that falling volume! It is certainly possible that the QQQQs will blow through the resistance and never look back. But the truth is stocks don’t go up in a straight line, and trees don’t grow to the sky. Computer-based program-trading now represents more than 60% of all trading. Many of these programs that base their trades on support and resistance lines. They become de facto trading rules. The line at 50.65 — the high for 2010 — will be difficult to cross. Even in 2004, after five positive quarters in a row, we had a significant summer correction. That’s what I’m betting on again this year,” DeHaemer Reports.
See More Details To Christian A. DeHaemer’s Article: HERE
We have put together some details on the PowerShares QQQ ETF (NASDAQ: QQQQ) including all of the holdings within the ETF. Investors should note that Apple Inc. (NASDAQ: AAPL) is weighted heavily in the ETF to the tune of 17.95% and may play a major role in the results of the ETF.
PowerShares QQQ (NASDAQ: QQQQ)
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PowerShares QQQ™, formerly known as “QQQ” or the “NASDAQ- 100 Index Tracking Stock®”, is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consists of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The portfolio is rebalanced quarterly and reconstituted annually.