“The market has deteriorated from a relatively strong technical picture to a near dire situation over four trading days. The SPX closed below its much-watched 200-day moving average, inducing an increase in selling volume as the institutional investors became more engaged in the trend change.  Now, the relative strength leading Nasdaq 100 Index, represented by the PowerShares QQQ Trust (NASDAQ: QQQQ) shares, is threatening to follow suit as its 200-day moving average is only 20 cents below Thursday’s close,” Chris Johnson and Jon Lewis Report From Options Zone.

Johnson and Lewis go on to say, “The QQQQ shares will dictate the next 3%-5% move in the market today. Mixed earnings results after the close from Oracle Corporation (NASDAQ: ORCL) and Research In Motion Limited (NASDAQ: RIMM) won’t help to provide the direction, leaving everything to the technicals. As the Nasdaq 100 has been a leading index on the rallies, short-term traders should look to cover their portfolios with additional put protection today should the QQQQ shares break below their 200-day trendline. In a similar situation is the iShares Russell 2000 Index (NYSE: IWM), which came to rest within a few cents of its 200-day moving average and the lower “band” of its regression channels drawn from the 2009 bottoms. What does this mean? Once again, a support level that must hold on today’s trading in order to keep any sense of a tradable intermediate-term bullish trend.”

“We recommended that options traders buy short-term puts yesterday, a move which has already paid some returns after today’s action. For now, we would recommend that you hold that put exposure UNLESS we see a strong move off of the support levels indicated on the (NASDAQ:QQQQ) and (NYSE:IWM) shares. Failure to hold these marks will see the market spiral another 2%-5% lower over the next 3-5 trading days. Traders should also beware that any support from these technical trends may be short-lived. As tedious as it may be, a market environment like this dictates that traders and investors stay in tune with the day-to-day activity,” Johnson and Lewis Report.

We have put together some more details on the PowerShares QQQ ETF (NASDAQ:QQQQ) and the  iShares Russell 2000 ETF (NYSE:IWM) below for you to take a look at.

PowerShares QQQ ETF (NASDAQ:QQQQ) Visit Our QQQQ Category: HERE

The investment is a unit investment trust designed to correspond generally to the performance, before fees and expenses, of the Nasdaq-100 index. The fund holds all the stocks in the Nasdaq-100 index, which consists of the largest non-financial securities listed on the Nasdaq Stock Market. The fund issues and redeems shares of Nasdaq-100 Index Tracking Stock in multiples of 50,000 in exchange for the stocks in the Nasdaq-100 and cash.

iShares Russell 2000 ETF (NYSE:IWM) Visit Our IWM Category: HERE

The investment seeks investment results that correspond generally to the price and yield performance of the Russell 2000 index. The fund invests at least 90% of assets in the securities of the underlying index. It uses a representative sampling strategy in order to track the Russell 2000 index, which measures the performance of the small-capitalization sector of the US equity broad market. The fund invests in approximately 2000 of the smallest capitalization-weighted companies in the Russell 3000 index.

IWM, QQQQ