The PowerShares QQQ Trust (QQQ) continues to be a market leader as it is up 3.6% so far this month, closing Tuesday at trend line resistance, line a.
The SPDR S&P Homebuilders (XHB) has had a sharp bounce over the past three days, as it reached the daily starc+ band. As I have mentioned before, it actually contains homebuilding-related stocks and not too many homebuilders. Its two largest holdings of just under 4% are Lumber Liquidators Holdings (LL) and Lowe's Companies (LOW).
What it Means: The improvement in the technical studies does suggest that the market completed a bottom in late August, which was sooner than I expected. On a short term basis, many of those on the short side have been squeezed out already. This increases the odds of a pullback, especially with the FOMC meeting next week.
There are quite a few stocks in both the health care and materials sector that I have recommended, but several of the orders have not yet been filled. I also like the iShares Russell 2000 Index (IWM) and will be sending out a Tweet once we get a pullback.
How to Profit: For the PowerShares QQQ Trust (QQQ) go 50% long at $77.42 and 50% long at $76.64 with stop at $73.13 (risk of approx. 5%).
For the SPDR S&P Homebuilders (XHB) go 50% long at $29.44 and 50% long at $28.94 with stop at $27.77 (risk of approx. 4.9%).