As I suspected yesterday, we were due for a breakout. YM tagged 10388, not even getting to 10370 area and just rocketed up to 10503. The VXN was the canary in the mine signaling an imminent rally in techs and that is exactly what happened as they took center stage and leadership. ES now has upside risk to 1223, YM to 10560 and NQ to 1617. QQQQ 40 is a serious zone of resistance, with excess call open interest. I would consider a counter-trend short when we get close. Here is the chart of VXN (Nasdaq volatility)and what I was looking at yesterday. Notice how we tagged 18 twice, about 10% above 10 dma and not coincidentally trendline resistance in place since early 2003. I think that trendline will be history soon as we enter a period of higher volatility, which is great for traders. But for now, that potential reversal had to be respected and shorts who did not heed the warning certainly felt some pain today. The flip side is now approaching, with a reading below 15 signaling time to go short NQ/QQQQ again.
This entry was posted
on Wednesday, November 02, 2005 at 4:27 PM.
