The tech heavyPowerShares QQQ (
), tracking the 100 largest nonfinancial stocks on the Nasdaq,
broke below its key 50-day moving average for the first time in
10 weeks Tuesday.
The technical level is widely watched by traders and often
serves as a level of price support. Failure to hold that level
begets market weakness. In afternoon trade, QQQ fell 1.46% to
67.35 in heavy volume.
SPDR S&P 500 (
) fell 0.71% to 144.60, but held above the 50-day line.
"This is a healthy correction. There's little reason to
believe it's going to go lower," said Randy Frederick, managing
director of active trading and derivatives at Charles Schwab.
"The big bottom of the market has been taken out by (European
Central Bank President Mario) Draghi and (Federal Reserve
Chairman Ben) Bernanke."
With no major economic news events happening this week, the
market will likely level off in a day or two and start to go back
up, he added. He sees the S&P 500 finding support at 1440 or
1430 -- near the low on Sept. 26. That level translates to $143 a
share for SPY.
"It is noteworthy that stocks have not been able to follow
through on the Fed-induced rally in the first of September," said
Ted Barnhart of Barnhart Investment Advisory in Oak Brook, Ill.
"In addition, last week's debate has likely increased the
probability of a Romney victory, which many will conclude as plus
for the economy as a whole, but is likely to stall some of the
recent easy money policies."
ETF investors can expect more volatility as third-quarter
earnings season gets under way withAlcoa (
) reporting after the close Tuesday. The aluminum producer is
likely to report a thin profit as its transport and aerospace
products businesses help compensate for a weak global metal price
environment, Reuters reported.
"We continue to advise caution in this environment as the
market moves in a mostly sideways consolidation, as very few, if
any, stocks have issued buy signals in recent days, while some
leaders have come under pressure," Virtue of Selfish Investing
wrote in a client missive.
Chinese Internet-search giantBaidu (
), BlackBerry smartphone makerResearch In Motion (
)and surgical robotics makerIntuitive Surgical (ISRG) led the
declines. Baidu shares gapped down 6.8%. It has been trending
lower since April and trading under the 200-day moving average
for most of that time. It reports Q3 results Oct. 17.
RIM gapped down 4.5%. It's experienced a brutal landslide
since February 2011. But it started trading in a sideways range
since June and may be forming a bottom.
Jefferies analyst Peter Misek warned that the company's
make-or-break line of new BlackBerry 10 smartphones is unlikely
to hit store shelves until March, weeks later than investors had
Intuitive fell as much as 3.9% intraday before paring back
losses to 2.7%. It's consolidating below its 200-day moving
average and has been in a downtrend since early May. It's set to
report third-quarter results Oct. 16.
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