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Inchworm scenario unfolding near-term

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Stocks have gotten a bit green in the last couple of hours and near-term its interesting to see the action unfold. Even longer- term swing traders should perhaps understand the current action and how the "inchworm" looks to be trying to inch its way out of the cocoon.

In the 01:00 Update, we talked about how the Biotech Index (BTK.X) had been hovering around the unchanged levels. How quickly that has changed as the BTK.X now trades up better than 3%.

Similar action is being found in the GSTI Software Index (GSO.X) as that group of stocks has moved from unchanged to trading up better than 2%.

With the "tail" of technology showing some gains, that has the Semiconductor Index (SOX.X) recovering from earlier -3% declines to now find some bullishness and trade down just 1%.

A short-term trader can perhaps really "fee" or observe how the inchworm action in unfolding.

It's impacting the NASDAQ-100 Trust (AMEX:QQQ) $31.78 +1.21% as we thought it might as this group of stocks has just edged above its morning high of $31.75.

An equity bull likes the reversal of fortune found in the Treasury markets today as YIELD that started the session higher, only to be turned lower in the session, has now jerked back higher. The bond market is now closed, but the 10-year YIELD ($TNX.X) 5.148% finished near its session high (result of selling in the bond) and this may give some spark to equities on the thought of a near-term allocation shift out of bonds.

Who knows? Maybe some hedge funds that are shorter-term trade oriented are also gearing up for a potentially bullish historical bet for next week.

Jeff Bailey
Senior Market Technician
Option Investor

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