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Starting to trigger some thresholds

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Trader talk among "tech land" has some traders noting that despite the recent strength of some technology stocks, there's been some "pain thresholds" achieved in today's trade, which has had a negative trade in many technology sectors.

If so, then look for the NASDAQ-100 Index (NDX.X) 963 -2.34% and NASDAQ-100 Index Tracking Stock (AMEX:QQQ) $23.94 -2.4% to begin picking up some steam to the downside as recent observations from the 10-year YIELD appear to have this index the "riskiest" for bulls should those bulls that have been holding on look to begin protecting profits, or "giving up" on a near-term rally.

10-year YIELD Chart - Daily Interval

We've shown "conventional retracement" on the 10-year YIELD ($TNX.X) chart before and had used its various levels to "benchmark" the major indexes against. Today's trade saw another round of buying in the benchmark bond, driving YIELD to a new low close for 2003, and rapidly approaching its October lows.

The Dow Industrials (INDU) 7,568 -2.21%, S&P 500 (SPX.X) 807 -2.57% and S&P 100 Index (OEX.X) 410 -2.4% all trade near their 80.9% retracement from the October lows to December highs. However, the NASDAQ-100 Index (NDX.X) 963 -2.3% is trading below its 50% retracement again today, while breaking below similar upward trend as seen on the 10-year YIELD ($TNX.X) chart.

In my view, it could well be that we're seeing some "tech bulls" begin to relinquish their hold on some technology stocks and from a risk/reward perspective in the major indexes, looks to have the NASDAQ-100 very vulnerable near-term to the 933 level, which would be its 61.8% retracement level.

For an options trader contemplating a bearish trade in an index, that's risking X-number of dollars in an options trade, it would be my view that the NASDAQ-100 (NDX.X) or QQQ $24.00 -2.24% offer the greatest amount of downside on further market weakness should Treasuries continue to find buying in the session's ahead.

Jeff Bailey

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