You're Bullish, But You Want To Know What To Watch For

| About: PowerShares QQQ (QQQ)

Summary

We became "all bear-ed up" last week after having a run on a bullish call.

How can you know if the bulls are correct or the bears? See if the market agrees.

We give, what we think is a key level to confirm if the market wants to go lower.

Everybody has their own take on markets. Us too. That said markets (NYSEARCA:SPY) (NASDAQ:QQQ) have a mind of their own as we all know. We want to know if the market agrees with us or not. We're going to give a key nearby price level that can help confirm if we're headed lower.

Quick History

On August 31st, we gave the following chart which helped get in front of the September 9th drop from the highs.

Here's the chart we showed at the time.

Click to enlarge

Source: Seeking Alpha August 31st.

Here's the view 9 days later.

Click to enlarge

Source: Seeking Alpha September 11th

We were bearish but we wanted the market to agree. When we saw it breaking a key level, we found we took it to mean risk. The levels we choose typically have a lot of break-out and break-down history ("Key Action"). That's where people have traded. When the market picks a side, it can sometimes show you its early leaning using these points.

That's what we want to do for today's market.

Click to enlarge

Source: Interactive Brokers

You can see above that the SPY price of about 217.50 was a key level. That's where the market either broke out, held, or broke down. Breaking through that level can confirm a bearish stance.

If you are bullish and want to wait, this is the level we'd watch. If you are bearish, this is the level we'd consider entering in a bigger way.

Fundamentals Matching Technicals

We think the market can break that key level. We think the combination of the bond market breaking down along with near-term US policy uncertainty are reasons enough to imagine a break of 217.50.

When the market agrees with the fundamental thought process, we can have confidence in our trade. A break of our line would mean to us that fundamentals and technicals are pointing down together.

Conclusion

We all have our own fundamental take. We want to see the market confirm that fundamental take. We think it will, but still, we want to see it. If we break 217.50, we'd guess there is further to go.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.