Of particular interest to us this past week was the precipitous drop in technology names, as the QQQ, after spending several weeks above both its 200 and 50 day moving averages, cratered to recent lows. This has been driven largely by severe weakness in QQQ top weighting, AAPL, which closed on friday right around its 200 day moving average ($363.90), and the stock has not spent much time at these levels since the August/September timeframe (although it did briefly trade lower momentarily in early October).
Heading into Friday’s action we also saw heavy put buying in SOXX, which would provide more evidence that fund managers are concerned with continued weakness in the tech sector over the next month or so heading into year’s end. Top components in SOXX include tech belwethers such as INTC, TXN, and AMAT. [ETF Chart of the Day: Semiconductors]
From a macro standpoint, the euro was under notable pressure this week, and the U.S.dollar rallied on the other hand, as FXE closed at its lowest levels since early October, and UUP vaulted accordingly. There has been consistent put buying in FXE as well as call buying in EUO in recent sessions, as it feels that institutional players have been “piling on” to a “short euro/long U.S. dollar trade” which is quite the opposite trade that was put on during the early part of 2011. We will see if the currencies experience a “whipsaw” as the last time the euro approached the $1.31 level against the U.S. dollar, it reversed course sharply and severely.
Next week, as trading volumes are likely to return to the market to some extent following the abbreviated Thanksgiving work week, we will be especially vigilant of recent cautious flows in the markets, and see if there is more bloodletting in store or perhaps a relief rally may surface.
PowerShares QQQ
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