STOCK INDEXES TRY TO REGAIN 50-DAY AVERAGES -- THE NASDAQ 100 QQQ HAS ALREADY CLEARED ITS BLUE LINE -- SO HAS THE TECH SPDR WHICH IS LEADING STOCKS HIGHER TODAY -- APPLE NEARS NEW RECORD HIGH
STOCKS BUILD ON YESTERDAY'S REBOUND OFF THEIR 200-DAY AVERAGES... Stock prices are continuing the rebound that began with yesterday's upside reversal off their 200-day moving averages. And they're now trying to clear some overhead resistance. Chart 1 shows the Dow Industrials entering an overhead "gap" area created by Wednesday's downside price gap (red lines). An overhead gap often acts as resistance; and a move above that gap would be a positive sign. The Dow has also reached its 50-day line. A close back over that line would confirm the importance of yesterday's upside reversal. Chart 2 shows the S&P 500 having already filled all of Wednesday's overhead price gap; and testing its 50-day line. A close above its blue line would be a positive sign.
QQQ LEADS... Chart 3, however, is the most impressive of the three charts. It shows the Invesco Nasdaq 100 QQQ Trust (QQQ) already trading above its blue line. In addition, the QQQ has also completed a small "island reversal" bottom (see black box). A bullish "island reversal" is formed when a downside price gap (formed on Wednesday) is followed shortly by an upside price gap (which was formed today). That's normally a good sign for a market and is usually associated with a market bottom.
TECHNOLOGY SPDR REGAINS 50-DAY LINE...The main reason the Nasdaq 100 QQQ in Chart 3 is doing so well today is because of a strong technology sector. Chart 4 shows the Technology SPDR (XLK) trading back over its 50-day average (after completing a bullish "island reversal" of its own). The two converging trendlines drawn from its July high and August low also have the look of a symmetrical triangle which is normally a bullish formation. In addtion, the XLK/SPX relative strength ratio (upper box) has been trending sideways between its summer high and low, and appears to be on the verge of a new record. That would be good for technology stocks, the Nasdaq market, and the other major stock indexes as well. Apple, for example, is the day's biggest gainer in the Dow, and one of the top percentage gainers in the QQQ and XLK.
APPLE NEARS NEW RECORD... Chart 5 shows Apple (AAPL) rising nearly 3% this afternoon and nearing a new high for the year. The stock is also nearing a test of its all-time high reached at the start of last October. A new record would be good for that influential stock and the rest of the market. Chips stocks are also boosting the tech sector and Nasdaq market today.
CHIP ISHARES TRIANGULATE...Chart 6 shows the PHLX Semiconductor iShares (SOXX) trading back above its 50-day average to help lead the tech sector higher today. More importantly, the SOXX has bounced impressively off a rising trendline drawn under its May/August lows (green arrows). The shape of its pattern since July also shows a flat upper trendline and two rising bottoms. That has the look of a potential ascending triangle which is usually a bullish pattern.
