QQQQ hit heavy resistance last Thursday went it ran into the 39 area.

After the close last Wednesday our system triggered a sell signal. We believe that the downtrend has most likely started and that this sell signal will probably only last a few weeks. We do not foresee a huge move down, but a small pullback from the upleg that started in July. As we believe that this upleg is still intact, the move down should be relatively small. Tonight we have charts of QQQQ, SMH, and the Russell 2000.

QQQQ hit heavy resistance last Thursday went it ran into the 39 area. This was just below the high at the end of June. We have used three support lines on the chart to show the area where we think QQQQ will fall before another move higher. A break of the 37 area would suggest that the fall is more severe than just a mild correction within a larger leg higher. Therefore, we believe that QQQQ will stay above this level.

The next is of SMH. SMH is very close to our first support line. The next line coincides with the 50 day moving average and a deeper fall would bring the ETF to the 30.50-31.00 area.

The Russell 2000 seems to still be in a symmetrical triangle formation. The index is currently right above support and a break of this support line should bring the Russell 2000 to the 690 area. If this area is broken, we expect the index to find support at the uptrend line.

It is possible that the market will have some sideways action in the coming trading days, but we still feel that this signal will be relatively short. Especially as a pullback to these areas could happen in just a handful of trading days.