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Stocks hovering near lows

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After a drop lower in the early part of this morning's trading session, the major market averages have been stuck in a rather tight range for the better part of the late morning.

In last night's Index Trader Wrap, my comments were mostly bearish for the major indexes and we talked about a potential bearish trade in the NASDAQ-100 Tracking Stock (QQQ) $23.08 -1.57% from the daily interval chart, which showed stochastics (5,3,3) approaching the "overbought" level, while MACD was trying to round below the zero level, but lower QQQ pricing might find MACD turning lower again should the QQQ fall to a trader's target near $21.30.

A quick look at the 60-minute interval, kind of like moving closer a step toward an interesting painting to pick up on some detail, we perhaps find how the 50-hour SMA serves as support today. A bear then understands "why" the QQQ may be finding some support near the $23 level after the break lower at the open.

NASDAQ-100 Index Tracking Stock (QQQ) - 60-minute interval

Most short-term traders (a day or two hold) don't really like to jump into a gap lower with a full position, but might establish a 1/4 or 1/2 position and monitor the trade for support resistance levels on a shorter-term view. Traders don't go and change all their moving averages to different MA's, but simply keep their standard 50 and 200 pd's along with others they find useful or have appeared to be important MA's in the past.

As such, a bear in the QQQ's is sitting back, petting the dog, and currently measures the QQQ for weakness below the 50-hour MA on the above chart. If not short/put, but somewhat interested, then the 21-pd or 200-pd MA on the above 60-minute chart are potential rally points to look for entry.

Note how stochastics on the 60-minute interval are "oversold", but a look at the daily interval chart would show stochastics just now starting to bounce lower from the "overbought" level. This most likely has a bear more eager to short/put any rally near-term at/near the $23.50 level.

Index trader's will note similar action in the Dow Diamonds (DIA) $84.71 -1.13%, SPDR (SPY) $89.95 -1.25% and S&P 100 (SPY) 446.61 -1.93%.

QQQ "heavyweights" have Microsoft (NASDAQ:MSFT) $47.62 -1.95%, Intel (NASDAQ:INTC) $15.92 -4.15% and Cisco Systems (NASDAQ:CSCO) $13.12 -3.3% trading lower. Notice that the most heavily weighted Microsoft (MSFT) is perfroming "inline" with the QQQ, while Intel, a semiconductor stock, where we noted marked weakness in the sector weeks ago, vastly outperforms to the downside today. Just an observation perhaps of how bears may find "out performance" to the downside when focusing on weaker stocks/sectors.

Jeff Bailey
Senior Market Technician
Option Investor

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