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No Signs of a Rally Yet

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The major indices continue to hover around their lows, and are still far away from mounting anything resembling yesterday's late-day rally.

Nasdaq-100 Daily Chart

After managing to climb back above support at $39.40 yesterday, the Nasdaq-100 (AMEX:QQQ) is once again in trouble. Today the tracking stock came close to testing support at $37.40, but has bounced off its low. The Qs are still down 3.4 percent, and will have to bounce $1.11 cents higher if it wants to get back above support at $39.40 like it did yesterday.

With Nasdaq-100 decliners beating advancers 81 to 6, the odds are stacked against the Nasdaq right now. The fact that some of the top losers are also some of the Nasdaq-100's largest components also doesn't bode well. Dell, Qualcomm, Intel, and Microsoft are all amongst the top 10 losers. As goes these stocks, so goes the Nasdaq-100.

Jeff Canavan

12:00 EST Update

Microsoft is "big egg" that's starting to crack

Shares of Microsoft (NASDAQ:MSFT) are the "big egg" of the NASDAQ-100 Trust (QQQ) as this stock accounts for approximately 11.22% weighting in the Trust. Recently I wrote an article regarding the six largest weighted stocks in this group and they have all shown weakness since that August 2nd commentary on premierinvestor.net (see "The six-egg omelet").

Recently at the $65-$66 level, I felt shares of MSFT were the best "low risk" technology stock trade in the market, but recent breaking of the bullish support and subsequent sell signal at $64 should have had bullish traders moving to the sidelines. A close below the $62.26 level could have the "biggest egg" of the six egg omelet showing yoke to $59.35. That could exacerbate the cracking of other technology eggs too.

Microsoft Corporation - last 10 months

Microsoft's stock price is flirting with its 200-day MA at $62.63. The fall from the $65 level to our stop of $64 should have mitigated further damage for technology traders. Current trading at $63 shows this stock isn't falling apart, but further decline will most likely weigh heavy on the NASDAQ-100 Trust (QQQ). Traders in the QQQ should always be monitoring shares of MSFT and perhaps the retracement levels on the above chart will help traders with their QQQ trades. I would think a close below the $62.26 level would then have the stock vulnerable to $59.35. A good market drubbing could see the stock fall to 80.9% retracement at $54.64.

Jeff Bailey
Senior Market Technician

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