Trap doors and gap pullbacks for traders
The SPX traded in a 3.8 point range (1351.56-1347.75) all day
until 3 PM when it picked up a few points to close at 1353.16. In spite of
the narrow range, the NYSE volume was high, with 1.73 billion shares, and the
internals positive with the volume ratio at 66, and breadth +1155, in spite of
the TLT -0.7%. The NYSE has a skew of about 35% to financial instruments,
like preferred stocks and different kinds of financial funds. This narrow
SPX range put the traders on the sidelines for the day. There were no
significant programs, and therefore no real market movement. Energy is the
primary daytrading focus because of the excellent two-way volatility, and that
did provide traders with some opportunities yesterday. The OIH gapped up
early to 126.22 on the 9:40 AM bar, which was the +1.5 VB, created a trap door
setup. The next opportunity was the 50% gap pullback to 123.36, which was also
the 240 EMA. All strategies are included in my
1st Hour Trading Module, which you should review if you daytrade.
The SPX and $INDU continue to get even more extended with the
key moves being the sudden spikes up initiated by programs, not the steady
institutional buying pattern across the NYSE floor. Much of that was the
third quarter mark-up. Mid-term elections are about five weeks away, and
each crisis that is hyped by the media as detrimental to the administration
seems to be immediately answered by another spike up in the major indexes to new
cycle highs. It sure as hell isn’t the fundamentals as much as “They try
to spin them.” The SPX and $INDU are into the six month extended reversal
zone, and you don’t make much money jumping onto the bandwagon jumping at these
junctures, as you can see both ways on the $INDU chart included below. If
“they” can keep this going into the mid-term election, they will most likely
break out the SMH from the current triangle and resistance at the 200-233 DEMA.
Have a good trading day.
Kevin Haggerty
