After bouncing off the orange downtrend line (support), SPY is currently backtesting the large rising wedge from below, thereby offering an objective short entry or add-on with a stop above the 217.50ish area (still only an unofficial trade idea, as with any broad market index tracking ETFs).
SPY daily Oct 14th
Now let’s look at the leading index, the Nasdaq 100/QQQ while from a top-down approach. The Nasdaq 100 has been the leading index for years & we all know that tech (the technology sector) is what drives the Nasdaq 100. Therefore, to get a good feel on where the Nasdaq & hence the US stock market is headed, we need to have a good read on where the tech sector is headed & the best way to do that is to figure out where the semiconductor sector is headed as the semiconductor sector is often used as a leading indicator for the tech sector. As of now, QQQ is still trading solidly below the recently broken uptrend line & has yet to even come close to backtesting it, which it may or may not do before moving sharply lower in the coming weeks/months.
QQQ daily Oct 14th
The SOXX (PHLX semiconductor ETF) is currently backtesting the bearish rising wedge from below, thereby offering an objective short entry or add-on while SMH (Market Vectors Semiconductor ETF) is current at the 66.40ish resistance level & still just shy of backtesting the recently broken rising wedge pattern.
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- SOXX daily Oct 14th
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- SMH daily Oct 14th
In a nutshell, it appears that all US stock indices have recently broken below key uptrend lines following divergent highs that indicator a major trend reversal is likely although as mentioned yesterday, there is still some work to be done to firm up the bearish case, namely a break below those key support levels that were highlighted yesterday on many of the top 10 components of the $NDX as well as the key 116 support level on QQQ (a break of which would likely coincide with a break of those same key support levels highlighted on the leading stocks in the $NDX).