Option Investor
Market Updates

Indexes are rock'n!

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Whether it's considered "irrational exuberance" or simply a bullish response to an upwardly revised first-quarter GDP reading, the major indexes are "rock'n" with the NASDAQ-100 Index (NDX.X) 1,194.60 +1.81% leading the charge after breaking free of its WEEKLY R2 and surging to our MONTHLY R2 of 1,193.80 in an impressive display of buying. The NASDAQ-100 Tracking Stock (AMEX:QQQ) $29.72 +1.81% moves in similar fashion as the Semiconductor Index (SOX.X) 378.33 +3.9% leads this morning's sector winner list.

As the NASDAQ-100 has broken clear of its WEEKLY R2, so has the Dow Industrials (INDU) 8,860 +0.76%, which holds a 65-point gain in the early going. Yesterday's trade saw both the NASDAQ-100 and Dow Industrials trade their WEEKLY R2s, and with the NASDAQ- 100 now at its MONTHLY R2, I'm looking for the Dow to follow this technical action with the thinking that computer selling is most likely limited here. This would have a near-term target for the Dow Industrials at 8,919.

Sector action is broadly positive at this hour, with Oil Service (OSX.X) 96.16 -1.21% and Natural Gas Index (XNG.X) 195.28 -0.17% the only equity sectors I show in the red. The Energy Information Administration reported that U.S. natural gas inventories rose 95 bcf last week.

The S&P 500 Index (SPX.X) 960.91 +0.80% posts a 7.6-point gain and looks to move higher after violating its December high of 954.28 on an intra-day basis yesterday. In last night's Index Trader Wrap, I wanted to be cognizant that the NASDAQ had found 2-days of selling after it had violated its December high several weeks ago, but today's trade has the SPX looking to extend gains. I'm noting that the daily chart of the SPX shows MACD (12.61) now moving above its Signal (12.12) for a bullish oscillator cross over.

The narrower S&P-100 Index (OEX.X) 483.43 +0.78% is showing a 3.6-point gain. In this morning's market monitor we noted how the DAILY pivot retracement did a good job of marking yesterday's day high and if broken, looked to set the stage for a test of its WEEKLY R2 of 484.50.

I wanted to quickly look at the NASDAQ-100 Tracking Stock (QQQ) chart, and the same chart we looked at in Tuesday evening's Index Trader Wrap, as the QQQ has hit the MONTHLY R2 and upper end of an ascending wedge discussed in that evening's wrap.

NASDAQ-100 Tracking Stock (QQQ) - Daily Interval

The QQQ is perhaps the "toughest" trade around for index trader's at this point. That goes for both the bullish and bearish trader. What's the upside from here? The bullish vertical count from the QQQ's point and figure chart is $45, and that would be a longer-term bullish objective.

I've quickly place a retracement on the QQQ from the October lows of $19.76 to a rebound high of $33.63 back on May 15, 2002. This would give a trader a 61.8% retracement at $28.33 and upside 80.9% retracement of $30.89 as a bullish target until we get new MONTHLY/WEEKLY levels after Friday's session.

Jeff Bailey

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