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Observation about QQQ and market direction
Started:November 11th, 2012 (12:05 PM) by Ozland Views / Replies:542 / 2
Last Reply:January 2nd, 2013 (10:19 AM) Attachments:0

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Observation about QQQ and market direction

Old November 11th, 2012, 12:05 PM   #1 (permalink)
Trading Apprentice
Billings Montana USA
Futures Experience: Intermediate
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Observation about QQQ and market direction

Though I've been trading the markets for several years, I'm new to futures trading and I'm still in sim mode, so feel free to discount some or all of what follows.

During the day, I have real time quotes from Etrade running in one window and I pay special attention to the $TRIN, $TICK, and Advancers vs Decliners. Lately, I've been paying even closer attention to the Q's because, unlike the days when AAPL was running, the Q's are often out of sync with the general market. Q's can fight AAPL with components in the $SOX index, which I also watch, but ultimately it seems that if AAPL is tanking then this will eventually put too much pressure on the Q's and they will tank as well and as go the Q's so go the other indexes.

Q's have always been a good market barometer as they have usually moved in sync with the markets but these days the Q's have decoupled and are, IMHO, a leading indicator moving to the beat of a different drummer, whether that's higher or lower.

So, if I'm looking to enter a trade in YM, my contract of choice now, I pay attention to all of the above and especially the Q's. I'm am finding that if the Q's begin to move up a few cents, then the other indexes will follow shortly. If the move in the Q's ends, then so will the move in other key indexes with a lag of a few seconds.

I wouldn't go long YM just because the Q's are moving up because there are other things I'm watching that I weight equally, but I definetly would not go long YM if the Q's are falling.

For example, let's just say that Advancers are well ahead of Decliners, $TRIN is well below 1.00, and there are a slew of positive $TICK readings. To me this indicates a postive market bias and being long or getting long should be the trade of choice, but if the Q's appear to be under pressure then entering the market long carries extra risk until either the Q's join in the fun or the markets cave in to the influence of this key index. In this example, while I'd want to get long, I'd be forced to wait until there was better clarity with the Q's.

I notice these types of correlations from time to time. During the summer months, if you wanted to know which way the markets would go, then all you had to do was watch the $SOX as the $SOX was pushing IWM and the Q's up or down. Now it appears that the Q's have moved into this position, for how long I don't know. However, I do think it's going to be important for index futures traders to keep a close eye on the Q's and for me it's easier to watch the Q's and get meaningful information from them rather than to watch the NQ and this may be only because I'm so used to doing so.

All IMHO, of course, and subject to change without notice.


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Old November 11th, 2012, 12:05 PM   #2 (permalink)
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Old January 2nd, 2013, 10:19 AM   #3 (permalink)
The fun is in the numbers
Point Roberts, WA, USA
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Good thread


Seems like an interesting thread.

(I'm surprise to not see a lot of follow-up posts!!!)

Do you have some charts showing examples of when everything was aligned and it went with the QQQ and went all pointed up and the Qs down and it turned down?

Is it still in operation?

Any theories why the Qs are leading and what conditions would change to push them off their leadership?


Good trading to everyone.
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