Sunday, September 29, 2013

Timid Tuesday – Indexes get Gun-Shy as they Re-Test the Tops

SPY 5 MINUTEThat was disappointing!

Things started out very exciting as we opened the S&P at 1,704 and ran all the way to 1,705 for a second there, just after noon but then reality stepped in and ruined the mood.  The Dollar had bottomed out at 81.13 but bounced back 0.5% to 81.55 and that, of course, took the S&P down 0.5% (because they have that kind of relationship) and we had a sad little close.  

On Dave Fry's SPY chart, it's 170 but, on the Index itself, we're testing 1,690 in the Futures this morning, down from 1,703.75 at yesterday's highs – pretty much the same thing but our goal for the index is 1,709.67 – that's the August 2nd high and that's what needs to be cracked on this run or the next time we test our +5% line at 1,680, it may not hold. 

Speaking of lines, it's no surprise, looking at our Big Chart, that the Nasdaq pulled back hard yesterday, dropping about 40 points (1%) from it's silly open to the more realistic close at 3,718.  As you can see from our spreadsheet (which is the real Big Chart, the rest is just illustration) the invisible string between the Nasdaq, the NYSE and the NYSE (both still below the Must Hold lines) was stretched more than 10% and either they had to go up or the Nasdaq had to come down.  

Of course AAPL tends to warp the Nasdaq but AAPL is DOWN $50 since the August highs and that's 10% so it SHOULD have a 1.4% drag (now 14% of the Nasdaq) on the Nasdaq but the Nasdaq is HIGHER than it was in August, when it was just below 3,700.  So, if AAPL is dragging the Nasdaq 1.4% lower but the Nasdaq is, in fact, 2% higher – then QCOM (7%), MSFT (5.5%), ORCL (4%) GOOG (4%), INTC (3%), RIMM (3%), CSCO (2.5%), AMZN (2.5%) as well as ATVI, EBAY, BIDU, COST, FSLR, NWSA, SBUX, PCLN, etc (1%ish) must be MORE than pulling their weight.  

That means the SQQQ ETF (ultra-short Nasdaq) is a nice way to protect yourself from a broad-market pullback.  SQQQ is $21.66…
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