$$ Weekly Stock Report

Jan 19-22, 2010
For annotated charts of $SPY and $QQQQ, please go here.

1. SPY

Price closed down 93 cents for the week at $113.64, well above the main trend line on price (~$109.50). I have drawn a dashed line showing an old positive reversal trend line that was violated in late October, but served as support in December and may serve as support again. Finally, there is top-bottom support at $111.

Momentum: Bearish divergence developed in the RSI last week. Watch whether that bear divergence line serves as resistance. If RSI punches through that line to the upside in the next couple of weeks, the up trend could accelerate. Overall, the up trend looks very strong.

Volume: Rising short and medium term accumulation.

Volatility: SPY spent most of December in a squeeze pattern, with Std Deviation below its long term Bollinger Band (125,1.5) and ADX hovering below 15. After forming a squeeze base, Std Deviation and ADX are now starting to rise which could easily power a nice rally.

Last Week's Outlook: SPY seems to have broken out of its consolidation pattern powered by increased volatility and strong accumulation. I expect SPY to exceed its outer Keltner Channel soon.

Next Week's Outlook: Look to enter on a positive reversal (lower low in momentum but higher low in price) which develops at a support level. Should SPY break to new highs, expect overhead resistance at ~$121.

2. QQQQ

Price closed down 70 cents for the week at $45.85, remains well above the main trend line on price ($43.50). I have drawn a dashed line showing an old positive reversal trend line that was violated in late October but may serve as support. In addition, there is potential top-bottom support at ~$44.50 (in up trends old tops often become future bottoms).

Momentum: Short term bear divergence has appeared on both RSI and %B forecasted last week's correction. Overall, the up trend appears strong. It obeys the up trend range rules (RSI 38+), with positive reversals at corrections and bearish divergence at tops. These are hallmarks of up trends.

Volume: Short, medium and long term accumulation starting to rise.

Volatility is falling after the mid-December breakout, but no squeeze play yet.

Last Week's Outlook: Given the bearish divergence at the outer Keltner Channel, we are due for a pull back soon.

Next Week's Outlook: Look to enter on further pullback to support, especially if a positive reversal develops (momentum makes lower low, price makes higher low).