The S&P 500 has been hovering around the MFU-3 target area of 4225 since late April and just recently successfully tested its 50-day average and triggered an ellipse buy. A weekly close above the most recent high would be positive and will likely lead to the next leg higher. On page 3, we show the weekly chart of the S&P, which remains well contained within its regression trend channel.

We believe this is a good risk/reward spot to take a shot at shorting the Q's.

Reviewing the components of the XHB and building related names, we see this area under distribution. We have been short LEN, MTH, and KBH and now adding the basket trade with the XHB. The initial target is $70.

The reversals we talked about in our last report on May 25 now have a few indices, such as the NDX and Russell 2000 breaking out above important resistance zones.

Most of what we talked about last week remains the same. Here we wanted to highlight a possible positive shift taking place in the Russell 2000. We will have more to say once the upside level gets triggered from the chart view below.

We have had a cautious view on the NDX and QQQ, and today's price action solidifies that view. The NDX had a feeble rally into its 50-day average and closed on its low. A close below the MFU-2 level which is where the index rallied from, will open the downside to the 12597 area, which is close to the rising 200-day average.

The S&P 500, Russell 2000, and the Mid-Cap (MDY) pullback to our target zones highlighted in recent reports. This may be all we get for a pause/pullback phase.

The NDX looks poised to break the MFU-3 level at 12963.

Price remains in a firm downtrend off the July high.

Given our cautious stance on the market, as noted in our weekly Technical Tuesday report, we received a few questions from clients asking for downside targets in the QQQ. We have an overlap of targets with our Money Flow Unit (MFU) and MOB target band, and there is the 200-day between both levels. The chart below shows this target zone of $300 - $305.

The reversals in the S&P 500, Nasdaq Composite, Russell 2000 are taking hold. We believe there is more weakness from here.

The NDX rallied just 7 points from our 1390 target and quickly reversed. As we noted on our May 6th note, "the inability of the index to move up from trend support for a short-term pop is telling," and the fact that the "pop" was so short-lived is very telling. It shows that selling pressure is increasing, and the index is at risk of breaking support at 13333.

The XLK has been losing upside momentum on an absolute basis and has recently broken its relative performance vs. the S&P 500. Our multi-factor technical model has been picking up this deterioration in recent weeks, where the score has gone from a top level of +10 to now at +5.30. The Software group, as measured by the iShares (IGV) ETF, has been deteriorating at a rapid pace with a decisive break of its relative performance line and a weakening of its model score. We recently shorted COUP in that space.

We are taking a long trade in the NDX as price has reversed from the uptrend line we highlighted in our Tuesday report.  This may end up being a very short-term trade, not sure. But this is a good spot to put the trade on.

We are cautious short-term as the following major indices are at either a Money Flow Unit (MFU) target or MOB target band: S&P 500, Nasdaq Composite, Russell 2000, and MidCap (MDY).