The 50-DMA did its job! After a perfect touchdown in the NASDAQ QQQs to the 50-DMA at 270, today the NASDAQ gained 2.92%.
All the issues for the tech drop -- Softbank, overbought conditions, lack of a stimulus deal, China tensions, vaccine delays, etc. -- got the bears suited up for riding the waves. However, just like what we have seen for an exceptionally long time, the market ignored everything and put those bears back on dry land.
The high in QQQs on September 2nd was 303.50. The low was 269.66, made on September 8th. A 50% move takes QQQs to around 281. Today's high was 280.05.
So bears, I'd keep my life preserves on, just in case.
Yesterday's price action put in a near-textbook inverted doji hammer candle. For those of you who do not know candles, an inverted doji typically means forced selling. When it happens right on a major moving average, you should take notice.
Furthermore, the 10-DMA in magenta comes in around 289. The other indicators on the chart are our price performance and real motion indicators.
Price performance shows that QQQs are now underperforming the SPY. Real Motion shows that while QQQs held the 50-DMA, RM broke below it. That means that there is a divergence between momentum and price and that momentum is lagging. The volume performance also broke below its moving average, which indicates a waning performance as well.
Hence, two scenarios are likely now that QQQs held the 50-DMA and buying replaced selling.
The first scenario is that a bear flag forms if QQQs cannot clear 281, let alone 289. In that case, the next move under 270-271 should bring the bears back into the water.
In the second scenario, today's action is a mini V-shape bottom that held the 50-DMA. In that case, through 281, you can think higher and get out quick if it fails under 277.
Today I spoke with Jill Malandrino on NASDAQ Trade Talks. Click here to listen to the interview.
- S&P 500 (SPY): Turns out an inside day with 342.64 point to clear, 332.88 support
- Russell 2000 (IWM): 153 resistance to clear and 150.50 support to hold
- Dow (DIA): 284 resistance, 275 support then 272.40
- Nasdaq (QQQ): 281, 289 resistance; 277, 275, 270 support
- KRE (Regional Banks): Broke back to unconfirmed bear phase
- SMH (Semiconductors): 166.60 the 50-DMA with 172. Area resistance
- IYT (Transportation): 194.67 support with 200 pivotal
- IBB (Biotechnology): 125-130 range to break
- XRT (Retail): 50.00 key support. 52 resistance
- Volatility Index (VXX): VIX holding better than VXX - watch VIX at 28.00 and, if can clear back over 30.50, trouble
- Junk Bonds (JNK): 104.50 support
- LQD (iShs iBoxx High-Yield Bonds): Starting to look vulnerable under 134.56 - that would yield caution
- GLD (Gold Trust): 180 did hold and now should hold
Director of Trading Research and Education