Bernie Schaeffer: A QQQ-Tip
by Bernie Schaeffer and Jerry Wang 12/6/2002 1:56 PM
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QQQ
The Nasdaq 100-Trust (QQQ – 26.40), or the "cubes," as they are commonly known, saw over 130.4 million shares change hands on Wednesday, the heaviest QQQ volume since the July 25 market plunge. High QQQ volume in recent weeks has actually been associated with up days in the instrument, but the QQQ retreated by two percent on Wednesday's heavy turnover. Prior to Wednesday, the heftiest recent QQQ volume on a down day was 103.3 million shares on October 9, which proved to be a short-term nadir, And then the QQQ put in another low on October 16 on a hefty 97.8 million shares. So Wednesday's heavy QQQ volume might be indicating that an end to the pullback is near.
Perhaps of greater significance is the QQQ option activity. On Wednesday, put volume handily exceeded call volume by more than 90,000 contracts in the front three months. A bullish signal has occurred historically in the 13 instances when QQQ single-day put volume exceeds call volume by at least 88,000 contracts. The data included in the table below dates back three years from December 1999 through the present. The last two examples of this phenomenon were on October 18 and October 30, both good jumping-off points for the QQQ.
Below is the put and call volume activity on the QQQ for the past month. Note that QQQ put volume has exceeded call volume over the past four sessions, and this was also the case for the November 20 through November 26 period. The heavy QQQ put volume and the high QQQ put/call ratios over the recent consolidation period bode well for a resumption of the QQQ rally. Yesterday, more than 308,000 put contracts crossed the tape on the trust. This marked the second-highest single-day put volume ever on the QQQ, behind October 18 of this year, when nearly 320,000 puts traded. The over 287,000 calls that traded came in 20th in terms of all-time call volume.
