ETF HQ Report – Anticipating

April 25, 2011 – 07:30 am EDT

It gets a little bit spooky when the market behaves exactly as anticipated over such a prolonged period.  For the last few months she has been particularly predictable and that always leaves me feeling on edge.

Last week we said that it was crunch time for the bulls and that any further declines would cause major technical damage.  Thankfully they heeded the warning and powerfully drove the market higher.  Now the new highs that we have been talking about since mid march are just a stones throw away.  Lets take a closer look…

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ETF % Change Comparison

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ETF % Change Comparison

SMH and QQQ were the market leaders over the last week and DIA finished at a new high for the year, all of which are positive signs.

 

Learn moreETF % Change Comparison

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A Look at the Charts

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SPY

It is difficult to pick holes in SPY but OBV is under performing the price action.

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QQQ

Besides sluggish volume everything looks good for QQQ.

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SMH

Strong volume and strong price action from SMH = healthy bull.

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IWM

OBV is at a new high and the Small Caps are looking very healthy.

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IYT

IYT is back above $95, has healthy volume flows and a multitude of established support levels underfoot.

 

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OM3 Weekly Indicator

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OM3 Indicator

The OM3 indicator lacks decisive confidence in this market.

Learn moreThe OM3 Indicator

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TransDow & NasDow

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TransDow & NasDow
TransDow – After just one week the Dow has again become dominant over the Transports.  As a result the position has been closed and returned to cash.

NasDow – The Dow remains dominant over the NASDAQ and has been for 132 days now.

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What the TransDow Readings tell us:

The TransDow measures dominance between the DJ Transportation Index (DJTI) and the Dow Jones Industrial Average (DJIA). In a strong market the more economically sensitive Transportation Index should be dominant over the DJIA.

Historically the DJTI has been dominant over the Dow 45% of the time. The annualized rate of return from the DJTI during this period was 18.47% with the biggest loss for one trade sitting at -13.27%. The annualized return from the DJIA during the periods it was dominant over the DJTI was just 4.06% and the biggest loss for one trade was -16.13%. A 4% stop-loss is applied to all trades adjusting positions only at the end of the week.

What the NasDow Readings tell us:

The NasDow measures dominance between the NASDAQ and the DJIA. Using the same theory behind the Trans Dow; in a strong market the more economically sensitive NASDAQ should be dominant over the DJIA.

Historically the NASDAQ has been dominant over the DJIA 44% of the time. Taking only the trades when the NASDAQ is above its 40 week moving average the annualized rate of return was 25.47% with the biggest loss for one trade sitting at –8.59%. The annualized rate on the DJIA during the periods it was dominant over the NASDAQ is just 8.88% and the biggest loss for one trade was –12.28%. A 8% stop-loss is applied to all trades adjusting positions only at the end of the week.

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LTMF 80 & Liquid Q

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LTMF 80 & Liquid Q

The LTMF 80 continues to hold a position in QQQ that is showing a profit of 2.64% after 27 days.  Liquid Q has returned to cash after 62 days to log a small loss of 0.53%.

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Historical Stats:

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LTMF 80 & Liquid Q Stats

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How The LTMF 80 Works

LTMF stands for Long Term Market Forecaster. It reads volume flows relative to price action and looks for out performance of volume measured on a percentage basis over the prior 12 months. During a sustained rally the readings will reach high levels (near 100%) making it imposable for the volume reading to always outperform price so any reading above 80% will maintain the buy signal. This system has outperformed the market over the last 10 years but performance has been damaged by some nasty losses. It only produces buy signals and only for QQQ.

How Liquid Q Works

Liquid Q completely ignores price action and instead measures the relative flow of money between a selection of economically sensitive and comparatively stable ares of the market. It looks for times when the smart money is confident and and can be seen by through volume investing heavily is more risky areas due to an expectation of expansion. This system has outperformed the market over the last 10 years and remained in cash through most of the major declines. It only produces buy signals and only for QQQ. We will provide more performance details on the web site for these systems soon.

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Summary

We are looking for a continuation of the story we have been telling for the last few months.  The healthy pull backs have occurred… support has been tested and proven… now hopefully the new highs we have been anticipating are not far away.

Any disputes, questions, queries, comments or theories are most welcome in the comments section below.

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Cheers

Derry

And the Team @ ETF HQ

“Equipping you to win on Wall St so that you can reach your financial goals.”

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Poem of the Day

Lose this day loitering – ’twill be the same story
To-morrow – and the next more dilatory;
Each indecision brings its own delays,
And days are lost lamenting o’er lost days,

Are you in earnest?  Seize this very minute –
Boldness has genius, power and magic in it.
Only engage, and then the mind grows heated –
Begin it, and then the work will be completed!

– Johann Wolfgang Von Goethe

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