Which Stock Index Will Perform the Best in Q4? The Charts Give a

The third quarter was a rocky one for the stock market. At the quarterly low, the four major U.S. indices were down anywhere from 5.3% to 6.8% from the high.

For most of the indexes, they went out around the low for the quarter, with poor price action on Thursday.

While they are trying to find their footing today on Friday — the first day of the fourth quarter — it’s a mixed picture. 

Although Q4 tends to be a strong period for the stock market, it also can see periods of heavy volatility, particularly in October.

Currently, we’re in the midst of a mild pullback, down about 5% from the highs.

Some think a 10% dip is coming. Others expect new highs in the S&P 500 before year-end.

Let’s look at each chart as we kickoff Q4.

Trading the QQQ ETF

I took a look at the Invesco QQQ Trust  (QQQ) – Get Invesco QQQ Trust Report earlier in the week and it’s clear that bulls are trying to carve out a low around the 21-week moving average and the backside of prior uptrend resistance.

The Nasdaq was the weakest of the group to start Q4 on Friday. It’s also riding a four-day losing streak.

On the plus side, it broke the September low and then reclaimed it — staving off a monthly-down rotation in the process. At least for now.

Aggressive bulls can consider a long position against Friday’s low and look for a rebound.

On the upside, keep the 10-day moving average in mind, followed by the 50-day. That’s for a short-term bounce.

For a longer term move, bulls have a lot to prove. That’s true for most of the indices at this point. For the QQQ, it needs to clear $375 in order for bulls to gain some runway momentum.

Keep in mind: Apple  (AAPL) – Get Apple Inc. (AAPL) Report and Microsoft  (MSFT) – Get Microsoft Corporation (MSFT) Report make up more than 20% of the QQQ, while almost half the ETF is FAANG plus Tesla  (TSLA) – Get Tesla Inc Report. How these six names trade will have a big effect on the QQQ.

Apple and Microsoft are holdings in the Action Alerts PLUS member club. Want to be alerted before they buy or sell AAPL or MSFT? Learn more now.

Trading the S&P 500

Like the QQQ, aggressive bulls have a nice setup in the S&P 500 as it broke its September low but was able to reclaim it. Traders can use a stop-loss just below today’s low and look to catch an upside bounce.

Specifically, that’s up to the 21-week moving average, followed by 4,385 — which is active resistance — then 4,400. There is an open gap up at 4,436 if it really starts to squeeze higher. 

A break of Friday’s low could put 4,230 in play, followed by the 200-day moving average. For equity investors, they can trade the SPDR S&P 500 ETF Trust  (SPY) – Get SPDR S&P 500 ETF Trust Report.

Trading the Dow

For the Dow, we’ll be looking at the SPDR Dow Jones Industrial Average ETF  (DIA) –