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Bullish the QQQ

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This morning in the "market monitor" we got a little bullish in the Nasdaq-100 trust near the $29.61 level as the broader market action was beginning to look bullish. Near-term the QQQ looks like it might have some upside to the $33.57 level on a technical basis. We're not just looking at the QQQ by itself. We were getting some upside alerts on different technology stocks. All were from oversold levels of retracement (at the lower ends of their retracement brackets), but action looked like bearish traders were getting more aggressive with their covering.

When I make observations in the market, I like to think "who's been the winner and on the right side of things?" For the past couple of weeks, the BEARS have been on the right side of things in the technology area. Now it looks like the BEARS are doing some covering. If they were right several weeks ago, then I'm not going to question their "buy side" today.

NASDAQ-100 Trust (QQQ) - last nine months

A bullish trade in the QQQ on the move above the $29.23 level looks like it might have some push behind it. MACD is crossing over and this is a short-term positive. I'm not looking for a move back to $50 anytime soon. If MACD will trend up to the zero level, then I think the QQQ should be trading up near $33.57 and 50% retracement. Giving some room with a downside stop just below $27.42. This would represent a small portion of a traders account as they have been having too much success to the bullish side in more "boring" stocks, but willing to take some gains from those trades and get a little more aggressive should NASDAQ continue to benefit from leaders.

In the past hour, we've also received our second upside alert from retracement in the NYSE Composite (NYA.X). During the week of trading halt we had outlined that this index would most likely show first strength and for the most part, the bulk of stocks I've tried to focus on from the bullish side are listed here. So far, this index has had a sharper technical move higher and I'm still looking for leadership from NYSE listed stocks. Getting it here and perhaps a reason why QQQ may get boost to try and play some catching up as bears get a little more aggressive. Bears hate to see a leader lead.

NYSE Composite Index - last ten months

We've seen more of a "v-bottom" from the NYSE Composite (NYA.X) and that's what a bullish trader like to see. We're looking at the QQQ as a group that might try and play some catch up near- term. We will want to monitor the NYA.X for leadership. If things start slowing down here, then I'd expect many NASDAQ stocks to do the same. Should the NYSE Composite start to "peter out" then move up those stops in bullish trades on the NASDAQ! Watch the head of the snake NYA.X as the tail of the snake (QQQ, COMPX) will most likely follow!

Jeff Bailey
Senior Market Technician
Option Investor

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