Looking over the pre-market action of top components of the $NDX as well as the other major US indices, it is clear that today’s large gap in the $NDX/QQQ will be largely due solely to one stock, AAPL (Apple). After hammering off the critical 40-week ema last week (a key technical level as recently highlighted), AAPL announced better than expected iPhone sales in addition to a 7:1 stock split. With AAPL currently indicated to gap over 8% above yesterday’s close, the largest component of the Nasdaq 100 is pulling that index along with it as the $NDX futures are currently trading up about 1.6%. The pre-market action of the remaining top ten components of that index is considerable muted for the most part and the two other major US broad averages are indicated for a much smaller gap than the $NDX (3x smaller for the $SPX and 8x smaller, at only 0.20% for the Dow). Of course, how the markets follow-up and close the day is what’s important as gaps are either built-on or faded.
Basically, this choppy market action only reinforces my preference to keep things light for now, especially with earnings season underway. As far as my near-term scenario for the QQQ, today’s expected gap will likely bring us close to the downtrend line that I’ve had on the recent 60 minute charts. Yesterday’s 60 minute scenario had the Q’s bouncing off the former T2 bounce target level, which is where we closed yesterday (or just a hair below). Today’s gap will exceed the bounce expectation as drawn on yesterday’s scenario but should take the Q’s to the downtrend line as per Tuesday’s alternative scenario. Tuesday’s 60 minute chart is below with this “hybrid” of the two scenarios added in with the dotted red lines. Obviously, the potential for a solid break above that downtrend line does exist and that would be my alternative scenario, with an upside target TBD if & when that happens. As of now, my primary scenario defaults to Tuesday’s alternative scenario of a tag & reversal around that yellow downtrend line on the 60 minute chart.
QQQ 60 min April 22- Modified Scenario April 24