The Gapping QQQ
By Andy Stout (
astout@sir-inc.com)
1/21/2003 8:19 AM ET
Since the Nasdaq-100 Trust (QQQ - 25.31) began trading in March 1999, there have been only 50 occurrences (or about five percent) that saw the trust gap down at least two percent from the previous day's close. Friday morning became number 51, with the QQQ opening at 25.83 (2.4 percent lower than Thursday's close of 26.44). Historically, a gap of this magnitude has been a prelude for continued market weakness.
The first time this happened was April 12, 1999, when the QQQ opened at 54.50. The trust proceeded to drop 10.7 percent during the next five days. However, from days six through 10, the losses were all erased with a rally of 14.2 percent. Following this brief rally was a 10-day decline of 5.4 percent. This type of "seesaw" action has been representative of what's happened in the past.
The graph below shows how a significant amount of the QQQ's downside activity following these gaps lower has occurred in the first five days.
Although the QQQ has historically been able to gain ground in days six through 10, the next 10 days of activity more than wipe out these advances with an average decline of 2.5 percent. Overall, the activity results in an average 20-day return of minus 3.1 percent. This is much lower than the average 20-day return during this time period of minus 0.8 percent.
The average five-day return has been minus 2.1 percent during these periods. Breaking this down further shows that, of the 50 times the QQQ has gapped down, 70 percent of the five-day returns have been less than zero. The average negative five-day return is minus 5.0 percent. That means there's a 70-percent chance the QQQ will lose five percent during the next five days. However, there's a 30-percent chance it will climb by 4.6 percent.
A good indicator as to whether we'll see a drop is activity on Monday. When the one-day return has been less than zero (29 times), 79 percent of the time (or 23 occurrences) the QQQ has gone on to post a five-day return of minus 4.0 percent. The other six incidents where the first day generated a negative return and the five-day was positive produced a five-day return of 1.6 percent.
If Monday should result in a gain, there would no indication about which way the QQQ will proceed. Of the 21 times that the one-day return was positive, only nine have remained greater than zero after five days.
Overall, there has been great vulnerability in the QQQ when one of these large gaps has occurred. Will the 51st gap act like the previous ones? Will we see yet another decline? While nothing can be guaranteed, one who doesn't learn from the past will not be able to adapt to the future.
- Andy Stout (
astout@sir-inc.com)
Enviado: 22/1/2003 12:10
. Mas liga a pedir as últimas noticias, suportes, resistências, sentimento bear e bull deste e daquele, etc, etc, lol!