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October 6, 2009 (FinancialWire) -- Dr. Joe Duarte (http://www.joe-duarte.com) recently noted: The S&P SPDR ETF (NYSE: SPY) and Powershares Nasdaq 100 ETF (NASDAQ: QQQQ | Quote | Chart | News | PowerRating) broke below their 20-day moving averages last week, and while Monday was encouraging, there is still work to be done.
Duarte added: Breaks below the 20-day moving average are signs that the short term trend in the market has given way. But, a one day break is easily corrected. That's why today's bounce is hugely important.
If the market and these important ETFs don't close above the 20-day moving average in the next few days, then what was once support, the 20-day line, will become resistance. That means selling pressure above the 20-day line will rise, and the key support of the 50-day average will be tested.
Resistance levels that become support levels once a stock or ETF rise above them become known as pivot points. When the stock or ETF can decisively break above that pivot point, it's a very bullish development.
That means that the battle ground on QQQQ is between 40-30 and 41.50, the range defined by both averages. For SPY, the range is 101.60 and 104.35.
Breaks above or below these key levels will likely be defining for the overall market's trend. For investors, this is a good time to stay away from buying new stocks. If you have open positions and they are doing well, there is no reason to sell them right away. Remain patient.
Duarte's conclusion: It often takes several days to see the resolution of a market trend. For that reason, it's a good idea to be very careful about any major decisions in the next few days. The one exception is if the market gives an extremely clear signal that it has worked its way through its consolidation/correction phase.
You can read about trading ETFs in more details in Market Timing For Dummies.
Make sense of today's nonsense. Get Doctor Joe Duarte's Market I.Q., at:
http://www.joe-duarte.com/free/order_choices.asp and subscribe to www.joe-duarte.com, for its daily energy review and stock picks.
A book for this market - The All NEW Market Timing For Dummies. at: http://www.tinyurl.com/market-timing .
Duarte partners with the Investors Resource Center at Investrend Information (http://www.investrendinformation.com).
Duarte's IntelligentForecasts.com (http://www.intelligentforecasts.com) provides free news coverage and analysis, and his daily articles and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Duarte has combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.
He is the author of: Futures And Options For Dummies, Successful Energy Sector Investing, Successful Biotech Investing and co-author of After-Hours Trading Made Easy. In early 2001, in Successful Energy Sector Investing, he correctly predicted that Venezuela's political problems could lead to an energy crisis in the United States. He has also appeared as a weekly guest on Market Mavens Radio and has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.
One of CNBC's original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990. His articles and commentary have been featured on CBS Marketwatch, Barron's, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines. In 2003, Doctor Duarte received second place, in the professional section, of the Medical Economics Investment Challenge with a 12-month return of 42%.
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Free annual reports for companies mentioned in the news are available through the Free Annual Reports Service (http://investrend.ar.wilink.com/?level=279).
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