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OPTIONSMART MORNING UPDATE: Upside seen limited

1. OUTLOOK. Investors were cautious after a Monday jump that pushed the blue-chip Dow to its highest level in 13 months. Analysts and investors alike have struggled to determine whether the recent rally is justified. The lack of news this week means the market is "going to go sideways and wait for its next cue. The market will likely remain in a tight band until the next Federal Reserve policy-setting meeting Dec. 16. Yahoo is done with its cost-cutting program and now hiring, CEO Carol Bartz told CNBC Tuesday. QQQQ's implied volatility inched lower. However, the daily chart shows that the tech sector runs out of gas and needs a catalyst to resume the upward trend. US futures point to a higher open. 

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2. TRADING OPPORTUNITY:  n/a

4.  Be aware: The QQQQ squeeze

 It looks like QQQQ traders are caught in a "squeeze". Why is that?  First, because the upper resistance has been met (see the chart above). That resistance came when the QQQQ was not able to penetrate the 43.70 level.  At the same time,  the QQQQ's bottom support is rising.  This effect is called a "squeeze", because the distance between the resistance and support is becoming a smaller and smaller.  That means that the distance between the upper to lower trading range for QQQQ is shrinking.  As a result, the QQQQ stock is forced to breakout up or down. According to our analysis, the upside is very limited in the short-term. A lot of positive news have been priced in. Learn more at

http://www.optionsmart.com/qep.htm

5. SPECIAL OFFER: Subscribe to our QQQQ Picks and save 10% on recurring subscriptions by entering coupon code B59E during checkout (expires on November 15th, 2009). New subscribers only. 

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