To Hit Price Objective, Chips Must Participate

The market action was both narrow and neutral, as the SPX ($SPX.X | Quote | Chart | News | PowerRating) daily range was just 4.6 points, while the volume ratio was 54 and breadth +369. NYSE volume was 1.45 billion shares as the SPX closed at 1183.82, minus less than a point, with the Dow ($INDU | Quote | Chart | News | PowerRating) at 10,550, +11 points. The (QQQ | Quote | Chart | News | PowerRating)s and Nasdaq ($COMPQ | Quote | Chart | News | PowerRating) were each +0.4% to 38.83 and 2094. The QQQs were helped by the (SMH | Quote | Chart | News | PowerRating), which was +1.8%, and led the primary sectors, with the RTH next at +1.0%. The (OIH | Quote | Chart | News | PowerRating) led the red sectors at -3.3% after having gained +4.3% the previous three days and closing at 78.70 which is approaching the 89-day EMA again for the third time. This has been a source of many profitable daytrades over the past 10 days. The "Generals' Pullback" (seminar manual and sequence trading module) would be in play at the 72 - 73 zone. The rest of the primary sectors were nondescript yesterday, telling us nothing.

For Active Traders

However, the narrow daily range yesterday was not without opportunity, as there were two RST sell patterns and one RST buy pattern in the ESZ4 for a total of 11 - 12 profit points vs. the 4.6 SPX daily range. The NQZ4 also gave traders the same combination of RST trades and like the ESZ4, closed at the top of its range.

Today's Action

The major indices are extended for sure into the current time zone this week, and reversal is the higher probability. The SPX closed in a narrow range between 1184.48 - 1179.85, which was, in fact, Monday's daily range. A breakout of that range could run to the 1190 level. However, the current angle of ascent for the SPX cannot be maintained much longer at the current annualized rate of over +200%. The initial retracement levels of any real meaning are 1161 and 1145.

The semis have picked up the pace, and as previously mentioned, the chips must participate for the major indices to continue the move to the 1254 .618 price objective to the 1553 high. The SMH is +5.5% the past three days, closing at 33.63 after a 33.79 intraday high. This puts price right at the key resistance zone from 34 - 35, which is certainly a show and tell for the SMH in its +22% rally (low-to-high) since the 09/06 27.78 low.

Any intraday short setups like RSTs, 1,2,3s and First-Hour Trap Doors will be taken if price works higher on Tuesday. Only carryover the daytrade if there is a profit cushion at the end of the day.

Have a good trading day,

Kevin Haggerty