Energy stocks demand focus daily

Kevin Haggerty is the former head of trading for Fidelity Capital Markets. His column is intended for more advanced traders. Kevin has trained thousands of traders over the past decade. If you would like to be trained by him, click here. or call 888-484-8220 ext. 1.

The SPX finished the week -0.3% at 1265.08, with Friday flat and only a 5.4-point daily range. The Generals hit the first day of December running, with new money, reallocation, etc, as the SPX advanced +1.2% after hitting 1249.39 and 1249.48 lows on both Wednesday and Thursday as minor support of the last rally high, 1245.86, was in play. The Dow, 10,878, was -0.5% for the week, while both the Nasdaq, 2273, and QQQQ. 41.54, were both +0.5%. NYSE volume on Friday dropped to 1.52 billion shares with the volume ratio neutral at 48 and breadth slightly positive at +223. The only two sectors green on the week were the semiconductors, with the SMH +3.9% and OIH +1.7%. All of the other sectors underperformed the -0.3% SPX, led by retail, with the RTH -1.8%, financials, BKX, -1.3%, and XBD, -1.8%. 

The Dow closed at 10,878 and is -3.0% from its rising wedge upper line at 11,200, which is also the 1.272 extension of the 10,985 - 10,219 leg down from 3/7/05 - 4/20/05. The Dow is +0.9% YTD while the SPX (the Generals' bogie) is +4.4% and the NDX, +5.4%. The same upper line for the SPX is about 1278, which is also an extension of the last leg down from 1246 to 1168. 1273 is the 2.618 extension of the bull cycle Wave 1 leg from 769 - 954. Any early rally this week into this symmetry coincides with the next time zone which comes into play from 12/7 - 12/15, so if there is to be any retracement before a final general mark-up into year-end, it will occur in this time zone. The initial downside levels for the SPX are 1235 - 1230 (-2.8%) and 1225 - 1220 (-3%) being the two most likely zones with an outside shot to 1210 (-4.3%).

Daytraders keying on the SPX have the 2-day range between 1266-85 - 1261.42 and 1261.42 is also a 1,2,3 close (daily chart) setup, so that is the initial downside focus on Monday. The leading sectors in this advance--XBD, +21%, SMH, +20% and XLB, +17%--are obviously very extended short-term so there is no percentage on aggressive intraday longside positions without some meaningful retracement. Key energy focus list stocks like (DO | Quote | Chart | News | PowerRating), (RIG | Quote | Chart | News | PowerRating), (SUN | Quote | Chart | News | PowerRating), (UPL | Quote | Chart | News | PowerRating) and (SLB | Quote | Chart | News | PowerRating) have broken out to new highs as crude oil has declined, so retracements to breakout levels should be watched. (HAL | Quote | Chart | News | PowerRating) and (KMG | Quote | Chart | News | PowerRating)  have some current continuation price room,  while (NBR | Quote | Chart | News | PowerRating), (NE | Quote | Chart | News | PowerRating) and (RDC | Quote | Chart | News | PowerRating) are at the high end of ranges. The absolute high average implied volatility of the energy stocks demand daytraders' focus daily regardless of how overbought or oversold they are. In the semis, any weakness in T(TXN | Quote | Chart | News | PowerRating) and (KLAC | Quote | Chart | News | PowerRating) certainly makes them price year-end mark-up candidates as they both have interesting monthly patterns

Have a good trading day

Kevin Haggerty