I mentioned in my weekend update that there were three sectors that needed to be watched this week: $RUT/IWM, $SOX/SOXX, and $NDX/QQQ. While I’m concerned about the $RUT & $SOX, I’m much more concerned with what’s going on in the Q’s.
There’s no question that the Q’s lead the market around by the nose. AAPL, MSFT, GOOG, ORCL, & INTC are the big dogs within $NDX which makes $NDX the market’s big dog. And if the big dog is not the lead dog, then you have problems.
Today the Q’s weren’t down that much compared the majors but the fact that the Q’s did not lead out of this latest little pullback is, IMHO, troubling. On the chart below I’ve put in two trend lines, similar to the way I’ve been drawing them on the $SPX chart. The Q’s tagged the upper trend line today and if the Q’s should break and close below that upper trend line, then they’re sure to test the lower line.
The tag/test of the trend line may be sufficient and based on extreme oversold readings in things like $NYUPV closing at 24 and the $TRIN closing at 5.58 if the Q’s do break the trend line it probably won’t be tomorrow because markets will probably have one of those mind blowing snap-back rallies tomorrow, or famous last words.
Note on the chart the yellow line 9EMA has yet to cross up through the 20MA. I mentioned this over the weekend and it’s still the case. Also note how the 50 & 200MA’s are pointing south which is not something longs want to see.
With volume so light, this is probably not a good week for making investment decisions. However, yesterday’s spinning top doji was confirmed as a ‘sell’ signal today with a close below 1262 so it’s going to be important for the $SPX to somehow make a run for that area tomorrow or maybe Friday. If, on the other hand, the $SPX continues southward, then trend lines could get tested and perhaps broken.
Turn up your paranoia-meter to 11 and leave it there.