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The PowerShares QQQ Trust (QQQ) has had a steady slide from the September highs as it has lost over 9%. It closed Wednesday just above the 61.8% support from the June lows.
- The weekly starc- band is at $62.57 with major support in the $60 area, line a.
- The longer term uptrend, line b, is now at $58.30.
- The weekly relative performance did make slight new highs with prices in September, but violated its WMA and the uptrend (line c) four weeks ago.
- The weekly OBV has also dropped below its WMA with key support at line d and the early 2012 lows.
- The volume was quite high on Wednesday and the daily OBV (not shown) is still well below its declining WMA.
- There is first strong resistance now in the $66-$66.50 area.
The iShares Russell 2000 Index (IWM) is down 7.6% from its recent highs and close just above the important support in the $80 area.
- The 50% Fibonacci retracement support is at $79.95 with the 61.8% support at $78.30.
- There is weekly chart support now at $77.70, line e, with the weekly starc- band at $76.23.
- The weekly relative performance still shows a slight uptrend, line g, suggesting it has been stronger than the S&P 500.
- The RS line needs to move above its downtrend, line f, and its previous high to complete a bottom formation.
- The on-balance volume (OBV) did confirm the price high in September, but this will be the fourth week that it has been below its WMA.
- There is next support for the OBV at the uptrend, line h.
- The daily OBV (not shown) shows a positive volume spike last week so the OBV is still above its recent lows.
- There is resistance now for IWM in the $81.50-$82.50 area.
What it Means: The major averages have now reached more important support, which increases the chances that stocks will rebound over the next few days. However, this week’s selling suggests that it will now take more time before a tradable low is in place.
It is encouraging that the small- and mid-cap averages are starting to outperform the S&P 500. This is more consistent with a year-end rally than a decline.
It will be important that those stocks, which appear to have already bottomed are able to hold above their recent lows. This includes the oil stocks.
How to Profit: No new recommendation