Wall Street’s Selling Programs are Watching These Numbers

Think about this: Most of the money that crosses the trading desks on any given day is not controlled by you and me, the retail investors.

Most of the money that moves the market and big individual stocks is traded by large institutions and hedge funds.

Those large institutions trade using algorithms that consider one thing when they are buying or selling: Prices and price movements.

Technical analysis is the easiest way for the “algos” to decide when its time to sell, which is why technical analysis matters more today than it did a few weeks ago.

The market is hitting a large number of tipping point numbers. The kind of numbers that tell the algorithms that it’s time to sell. Let’s walk you through one that you should be watching if you’ve been thinking about selling to avoid another 5-10% drop in stocks.

The Nasdaq 100’s 50-day Moving Average

This is probably the most important trigger in the market right now.

qqq stock chart

What Is It?

The Nasdaq 100 just posted its second close below its 50-day moving average. The last time this happened was in August 2023. The market fell another 6.6% over the following two months after that happened.

Why It’s Important

The 50-day moving average is the most watched trendline. It literally defines the saying “the trend is your friend.” This and the 200-day moving average are key components of technically driven selling, so a break below this trendline means that the computers will increase their selling.

What You Should Watch

We’ll see increased buying over the next two days as investors are looking forward to next week’s earnings reports from Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and other Mag Seven stocks.

That said, momentum for the QQQ shares has turned negative.

Going back to the theme that the trading algorithms are driven by one thing, numbers, you need to watch the Nasdaq 100 (QQQ) $430 price.

A break below this price will drive more algorithm selling as big money looks to sidestep what could be a rough round of earnings reports next week.

Here’s Where You Buy the Dip

The QQQ should find considerable support at $400 for several reasons. This is where you will see most of the algorithms rush into the market as buyers. That would represent an 11% pullback in the market, which is almost the exact measurement for what Wall Street considers a healthy correction.

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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