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QQQQ Price Action Suggests Correction Incoming

|Includes: AAPL, AMZN, ATT, BB, DIA, GLD, GOOG, GS, HPQ, INTC, MSFT, NFLX, PowerShares QQQ Trust ETF (QQQ), S, SPY, TLT, V, VXX, VZ, XLF
The QQQQ violated its one-month lower trend line today (Thursday, September 30, 2010 at 8:00 a.m. PST) suggesting that it may be on the verge of another correction. For the past 18-months, a violation of the lower trend line has led to at least a correction in the vast majority of cases and a bigger pull-back in the other cases. Yet, how far this correction can actually go in light of the 10 hefty POMO injections by the fed since August is anyone's guess. What we do know is that the last 3 times the fed initiated 9 POMO injections, the market was up 10% over the next 3-month period.

So while we may be in for a correction, I don't think this correction will be that big. We'll probably bottom out near the 50% retracement of the September rally in equities. Tread carefully right here. Bulls now have to place their hopes on the employment report and the bears need at least one more day of confirmation.

 


Disclosure: Short QQQQ