It's hard to believe it was not quite two weeks ago that folks were berating me over this lower line on the chart of the Invesco QQQ (QQQ) . You might recall many thought I should have started the line at the March low, which I believe they figured would show a break of the line when the QQQs were down near $250 on July 24.
My contention then, as it has been since I began drawing in this line back in June, was that this line had so many touches on it that it made it a good line.
Fast forward two weeks, and there is hardly anyone who believes the market can go down. You see, two weeks ago, not only did we tag the bottom of this channel line, I also showed you this chart of the daily reading for the put/call ratio (red line), because it had spiked to .91, which was the highest it had been since late June.
What a difference seven-straight days of rallying makes. The daily put/call ratio was .61 on Thursday, the lowest since June 8, as you can see on the chart. The black line is the S&P.
Do the QQQs have to make it back to the top of the channel? No, they don't. If they turn down before they do make it to the top, it should be considered a change for the worse in the pattern.
Any time the market has a pattern that is working and that pattern changes, we should be alert. In any event, the line is rising, so this week it comes in around $280; midweek next week, it would be closer to $285, depending how thick your pencil is.
The QQQs have been green for seven straight days. That is not unprecedented, but it is the longest stretch since they went 11-straight days back in December.
Perhaps you noticed that it was mega-cap tech that partied on Thursday, and everything else took a back seat? Perhaps you noticed that breadth was negative. Perhaps you noticed that the Russell took the day off and closed the day red. And, yes, all the while, folks piled into calls as shown above.
Do I think the QQQs will make it to the top of the channel? Not in the next few days, I don't. You see, the Daily Sentiment Index for the Volatility Index is at 10, so unless the QQQs are up nearly 8 points on Friday (possible but that would be incredible after the day they had on Thursday) I would expect we'll see a bout of volatility before they can tag the top of the channel.
I would also note that the VIX for Nasdaq was flat on Thursday. That's not that unusual, but it is rare. So perhaps the VIX saw the rest of the market, while the call option buyers only saw the QQQs.