Let's look at the rather complex chart of NQ (NDX futures). I have mentioned a few times the January gap, yet to be filled. Friday's sell-off occurred at or near 61.8% of gap, however we managed to close within the gap (open is 1737.50) and right above 61.8% 2006 (1739.25). Very important support area going forward, but we have a little leeway in light of QQQQ option activity. Put support is building at QQQQ 42 strike for April option expiration two weeks from now, so bears should not assume a new phase has started in their favor as far as techs are concerned. Yes, we have heavy call resistance at 43, so the range could get very tight as we enter an important earnings season. My guess is we probably take a swipe at NQ 1722.75, but I think bulls hold the line there, although a quick attack of weekly S1 at 1718 is not out of the question, that would put QQQQ close to 41, strong put support. As long as bulls achieve closing prices above NQ 1722.75, they still hold the aces, regardless of intraday volatility. Remember all those lowered earnings guidances at the beginning of the year? You can bet many companies will handily beat. SOX above 511 on a closing basis is also key. There will be many shorting opportunities as I think real damage was done, especially to ES and YM, but if we start hitting weekly support areas, I would flip long. ES and YM are the weaker markets, both closing below their respective 20 dma's, so I am inclined to stick to NQ if looking for long plays, but be patient, as bulls could have a few rough days ahead. Basically, short ES and YM rallies that stay below 20 dma's and hit NQ longs that stay above 1718 or so. Use tightstops and don't get married to a position. If the selling really starts kicking in, don't be a hero, go with the flow.
This entry was posted
on Sunday, April 09, 2006 at 11:56 AM.
