Diary of a Financier

Technology Error

In Capital Markets on Thu 18 Oct 2012 at 23:39

After he Technology (XLK) sector had a shakey start to 3q12 earnings season with Intel (INTC) and IBM issuing warnings, Google (GOOG) today landed a right hook upon the NASDAQ’s (COMPQ) temple, a body blow to the broad market. This is an important development in a crucial battleground for the bulls & the bears.

I’ve been following the NASDAQ ETF (QQQ) for a few weeks now, because the classical chart pattern that’s developed has provided clear warning signs. The “Qs” followed my lead lower, breaking through neckline support of a Head & Shoulder top ~$68.25. QQQ soon hit a Fibonacci level that provided support, as expected, from which the index bounded higher to $68.25 (again) yesterday. At that time, I noted the potential ceiling that existed there–support cum resistance as $68.25 was the neckline of the former H&S top:

QQQ daily- like its 2q12 analogue, QQQ has rallied from Fibonacci 38.2% support back up to neckline support cum resistance from its H&S top.

The intraday reversal from highs >$68 today is a bad omen. First Apple (AAPL) stumbled, then INTC and IBM. Now GOOG dropped a bomb today, -8% at the close after being halted nearly all afternoon in the wake of a double witching–bad earnings and a botched 8K filing by EDGAR’s proprietor, RR Donnelly (RRD). The Tech leaders are getting picked off, one by one. It’s a shame too, because I would’ve been a buyer if QQQ brokeout above its $68.25 resistance:

Despite a bearish analogue & bear divergence everywhere, SPX’s priceaction has frustrated me with unexpected buoyancy. The biggest driver behind SPX’s performance week-to-date had been Financials (XLF), which I mentioned favorably on Tuesday. For these reasons, I was starting to have trouble putting the pieces of the puzzle together. I thought about swallowing my pride and buying back some of the index exposure I had cast off over the past couple weeks… but I’m heartened by the warning shots fired by COMPQ today.

–Romeo

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  1. […] upon signals from the S&P and the NASDAQ, I posted a couple entries this week that provided progressive conviction at the end of a few […]

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