Yes, the Q's did decline to new reaction lows, breaking last Thursday's low at 37.92 on the way to the intraday low at 37.82.  However, there has been no downside follow-through, which is a warning signal to the shorts that perhaps the Q's are sold out for the time being, and are in the very early stages of a recovery rally up to the 38.50 area. Let's keep in mind, though, that although the Q's have warned us about a potential recovery rally, the price action has failed to confirm that such a rally is in progress, which will occur if the Q's can hurdle 38.15 for starters, and then the prior rally peak at 38.27. Barring a rally at least above 38.15, the Q's remain within the dominant micro downtrend that has developed off of Friday's recovery rally peak at 38.51.

MJP 10/11/05

Mike Paulenoff is a 25-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his E-mini S&P and QQQQ technical analysis and trading alerts. For more of Mike Paulenoff, sign up for a FREE 30-Day Trial to his E-Mini/Index Futures diary, or try his QQQ Trading Diary.