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1. Nasdaq 100 Reaches Important Level

By Gary Morrow
4/29/2009 3:08 PM EDT

The Nasdaq 100 bottomed six weeks ago just below $26.00.

NDX Daily Nasdaq 100 Index TradeStation

Unlike the Diamonds Trust(DIA Quote) and the SPDRs(SPY Quote) , the PowerShares QQQ(QQQQ Quote) did not take out its November lows during the early March dip. This divergent strength in the biggest names on the Nasdaq developed as near panic selling was pushing the other major indices well below their 2008 lows. As the overall market began to turn in mid March, the Nasdaq took the leadership role and has been outperforming with a 30% gain to date.

Also unlike the DIA and SPY, which have a long way to go before testing the January peak, the QQQQ is well above its early 2009 highs and has taken back a large part of 2008's second-half collapse.

QQQQ Daily (Nasdaq) PowerShares QQQ TradeStation

At today's highs, the QQQQ has recovered one-third of the drop off the July highs to the November lows. This area, near $34.00, is also the level of the fund's declining 200-day moving average. The QQQQ is testing this long-term moving average for the first time since early September when the market first began to accelerate to the downside. I expect the current rally to run into a bit of profit taking in this area.

Big-cap tech has had a huge run and is due for a healthy pullback. The declining volume over the past four days, as the market continued to rally, indicates a potential loss of upside momentum. A shallow pullback during the next week or so would be a strengthening event for the tech sector.