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The Nasdaq 100 Trust (QQQQ) and the Semiconductor Holdrs (SMH) both appear to be reaching inflection points. I consider an “inflection point” to be a level where there is percieved technical importance based on multiple ways of looking at the market. Looking at the two daily charts, you can see that they are both approaching;

  • Their June 2 highs
  • Their declining 200 day moving averages
  • 61.8% retracement levels from the April highs to the July lows

While this is not a reason to run out and sell, it is worth noting that with the markets approaching these potential resistance levels it is likely that;

  • Buyers will become less aggressive in their purchases
  • Sellers will be tempted to take profits
  • Shorts will be tempted to sell into these levels

All in all, it is a situation where we could see increasing supply and decreasing demand. While I do not think the markets will suffer any major pullback from these levels, I do think we could see a slowdown to the recent uptrend which leads to a few weeks of sideways activity. Fortunately for us, there will still be plenty of opportunities (long and short) in the individual stocks.

Look for more explaination in the video shortly after the close today.