Let's take a look at NDX (Nasdaq 100) weekly chart. There is lots of confusion out there and certain basics need to be examined. The 10 weekly moving average (blue line) has been acting as resistance since the week of May 7th. Currently at 1518.85, it holds the key and hope for bulls. Drawing a fib retrace from August 2004 low, we get 61.8% at 1477.47, not coincidentally the double bottom of the past two weeks. There is no doubt now that a break below 1477 sets up a test of 2006 lows (1446.77) and further down the 200 weekly MA at 1426. We are not there yet, however set your stops accordingly. Conservative traders might want to wait for a move above 10 weekly MA before entering any long positions. QQQQ has rather large put support at 36, so we should hold that level during this coming option expiration week. On the other hand, should we break below 36, put sellers will get squeezed and have to cover by shorting the underlying. That is the nightmare scenario we experienced in May and I certainly hope we don't see that again. Volatility sellers have been getting a little bolder leading up to this week and they will do anything they can to make your puts (and calls) expire worthless. Less see if they succeed.
click on chart for full size
click on chart for full size
This entry was posted
on Sunday, August 13, 2006 at 10:21 AM.
