Another tough day and no real bounce at the close. We are critical now. The SOX (semi-conductor index) closed at the 200 day moving average and NDX (Nasdaq 100, see chart) closed right at the 2002 trendline support and the 2004 highs. I can't imagine this level breaking with the large amounts of puts sitting at QQQQ 40 and 41 going into option expiration week. Furthermore, QQQQ did manage to close above 2006 lows. It's tight and it's scary, but I also think the selling is way overdone and not in line with reality, which is a resilient economy that should see gas prices considerably ease in the coming weeks. If the fear is truly interest rates, than techs is the place to be, not the DOW or SPX. We should rally next week, up to QQQQ 41 and maybe higher. I am not sure we will be able to hit 42, my guess is 41.50. In any case, it's a good trade from here, but don't expect miracles and take your profits as they come. A strong move below the 2002 trendline support for NDX would be catastrophic for the markets and create panic selling the likes of which we have not seen since 1987. I doubt it will happen, but as usual, I must make you aware of where we are and what could happen. If we lose support, we could head to QQQQ 39.36 gap close from last November, which would be NQ 1611/1619.
This entry was posted
on Saturday, May 13, 2006 at 6:02 PM.
