Edit Sunday, 10/7: Added QQQ daily chart below.
What a wild ride.
It’s not the news, but the reaction to the news that matters. Even with the Dow’s nearly 100pt swing, 20 of the 30 Dow stocks managed to close in the green thanks in part or totally to the mad men at the helm who stepped up to the plate around 3:37pm.
But it’s all about AAPL, or so it seems. AAPL is 13.96% of the $NDX/QQQ so as goes AAPL so goes the Q’s. AAPL is also in the $SPX and could be part of the reason that the $SPX closed where it did, though I’m not really certain about that. I wouldn’t be so bold as to rule out AAPL or the Q’s just yet and this weeks gain of 0.46% for $NDX is still a good gain, but if AAPL doesn’t come back around soon then it’s going to be trouble for big tech going forward and since big tech has been this rally’s lead dog then the demise of big tech will not bode well for other key indexes.
$SPX put in a key reversal with a Shooting Star doji. This a bearish reversal candle of indecision but is meaningless without confirmation. Confirmation would come with a close below 1456.89 before a close above 1470.96, Friday’s low and high, respectively. You can also see on the daily chart what looks to be a potential double top setting up. But you really have to be imaginative to see it especially since Monday or Tuesday could see a new high and potentially a new rally high. Still, both the above items need to be monitored closely early next week.
60min chart of IWM showing the huge reversal that began after the first candle. The chart doesn’t look good and anyone who bought the open thinking the market was heading even higher is hoping for a rebound on Monday/Tuesday. Key for me is that IWM closed above round # support but if it can’t hold above there early next week, then there’s a good chance it will work its way down to the lower round # support at 83 and then maybe lower than that.
I used to trade the IWM exclusively and one thing I learned is that IWM is a round # whore and by that I mean that it has a very strong tendency to take out round #’s. If IWM is going up, it often pushes through the next higher round # before resting and after the rest, it will take out the next higher round #, and so on. The same in reverse. The bottom line is that it’s going to be very important for IWM to stay above 84 early next week and if it does break 84 and stay below 84 for too long, then the next level of support at 83.28, +/-, may not hold and then IWM could easily run to 83 and test that level. Should 83 fail to hold then that would set up the potential for a succession of new lows going forward.
Even though I’m long some TNA at the moment, I’m agnostic about the market going forward. I’ve been waiting for a pull back to nowhere for so long that I find it hard to believe that we’re about to get it. But I could be wrong. Maybe earnings, which start with AA next Tuesday, will be enough to precipitate a sell off of one degree or another. Just have to wait and see.
Meanwhile, breadth indicators are all giving neutral readings so no real clues there.
As always, stay on your toes and GL in the week ahead.
QQQ chart added Sunday, October 7th:
The Q chart below shows the support and resistance lines that I put on the chart more than a week ago, I think. The upper resistance line is at 69.30 and on Thursday the Q’s pushed up through there but failed to close above there. On Friday the Q’s once more pushed above the upper resistance line and then dropped well below. Q’s will need to push above this resistance line and close above it Monday or Tuesday otherwise they are setting up what could turn out to be a Bear Flag pattern. The bottom of that potential Bear Flag is the dashed purplish line which for now serves as a new rising trend line.
The ADX line has dropped from 33 to 19 and is indicating the end of the trend. If this turns out to be the case, then confirmation would come with a couple of closes below the new purple rising trend line and then a close below 67.85, the most recent swing low. And a close below 67.85 in the early part of the coming week would confirm the theory that this past week’s action was nothing more than a dead cat bounce.
But we’re not there yet and it all depends on AAPL. If AAPL’s price is defended early in the week then the fact that the Q’s broke out of the Bull Flag pattern early last week should lead to new highs for the Q’s in a week or so.
Basically there’ s no real clarity on the chart as the Q’s are in a transitional phase. The direction that AAPL takes early next week will doubtless provide necessary clarity but until there is clarity then I’d be extra krispy careful.
Click on the chart and it will open in a new window.