QQQ (Nasdaq 100 ETF) has fallen to the intersecting 200-day SMA & EMA for the first time since the key Aug 5th low with SPY coming up (but still a little above) its comparable 200-day MA’s. This is where both humans and machines (algos, trading programs, etc.) typically step in & buy after corrections in a bull trend. Daily charts of QQQ & SPY below.
QQQ daily March 4th
SPY daily March 4th
However, to reiterate what I’ve been saying for months, I still expect the 200-day MA’s to get taken out this time around, reaction or no reaction first. With SPY still above its comparable 200’s, we could easily get intraday punch through the 200’s on the Q’s. Heck, based on the current technical posture, recent developments, & price action, I could easily see the Q’s blow right through them, going straight to jail (& don’t collect the $200). That’s not my preferred scenario (bounce first more likely IMO) but certainly on the table.
Bottom line: Active & nimble traders might opt to reverse (cover shorts & go long) for a reflexive bounce off the 200’s but nimble is the operative word here, as one would need to adjust accordingly, should the market just keep going down.
Typical swing & trend traders should recognize that although we’ve had plenty more recent “check marks” for my longer-term bearish case, thereby increasing the odds that the market will continue to my longer-term downside targets in the coming months+, the odds for a reaction around current levels until & unless the 200’s have clearly been put in the rear-view mirror, are elevated. Therefore, adding to & especially initiating new short position at this time is not very objective IMO.