Focus Both Ways On Semis And Brokers
What Friday’s Action Tells
You
Friday’s “program game” was a bonus
for
daytraders, but it was a very flat week on balance. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
closed at 1135 vs. 1136.47 the previous week and had a weekly range high to
low
of just 16.9 points. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) closed at 10,416 vs. 10,410 the
previous week. NYSE volume averaged just 1.3 billion on the week, with up
volume
to down volume about 1.2:1.
Although the major indices were flat, there
was a
definite trend in the primary sectors, as the semis led the downside, with
the
(
SMH |
Quote |
Chart |
News |
PowerRating)s -4.9% on the week, followed by the brokers, with the XBD -2.6%.
The
green leadership was energy, with the
(
OIH |
Quote |
Chart |
News |
PowerRating) +5.1%, gold with the XAU
+2.7%,
in addition to the
(
TLT |
Quote |
Chart |
News |
PowerRating) +1.4% (long bond proxy).
As Friday was expiration, the day’s action
means
little other than the 4 MA of the volume ratio ended at 60 and 4 MA of
breadth
+749, so any early strength this week will provide some short setups in the
major indices. The 5 RSI closed the week at 60.
For Active
Traders
You have to love “the game,”
provided you
understand it and plan for what it is. I have included the
(
SPY |
Quote |
Chart |
News |
PowerRating) chart
that
shows you the trader’s bonus on Friday. The gap down opening below
Thursday’s
113.34 low set up the first-hour gap reversal trade as price reversed the
113.34
low on significant volume. The “gang” took the SPY up to 114.22 by
the 10:30
a.m. ET bar, and the game was over as price traded down after this
artificial
move to 114.22, hitting 113.51 and closing at 113.63. (The Gap Reversal
strategy
is outlined on page 424 of the 777-page “Trading with the Generals
IV” seminar
book.)
Today’s
Action
This is being done Sunday for Monday as I
have a
one-day institutional seminar that I will be doing on Monday for
institutional
buy-side traders. On any more weakness in the semis, you have the
significant SMH levels from previous commentaries where you should concentrate on price
action. The SMHs is a below the line sector right now, having closed at
35.88,
below the 20-day EMA of 37.25, the 50-day EMA of 37.79 and 200-day EMA of
37.96.
The SMH ran +2.5% to 36.52 on the Friday morning reversal, then collapsed to
the
35.88 close vs. the initial 35.63 low on the opening bar.
The SPX closed at 1135 in an eight-day
consolidation following the wide-range-bar day with the 1122.50 low and
1140.42
close on 06/07. Price is above the 1124.89 20-day EMA, 1120.79 50-day EMA
and
1088.39 200-day EMA, which is, of course, an above the line situation, so
nothing bad happens until that changes. Also, in the above the line position
is
the
(
QQQ |
Quote |
Chart |
News |
PowerRating) which closed at 36.44 vs. its 20-day EMA of 36.30, 50-day EMA
of
36.07 and 200-day EMA of 35.02.
The other key sector with the semis is the
XBD
(brokers). The XBD has been in a trading range mostly below its 200-day EMA
of
127.60 since 05/06 and closed at 123.49 Friday. Some of the brokers are
obviously short-term oversold, but all of them should go on your focus list
as
two-way situations for daytrading purposes. Frame the downside levels for
both
the semis and the brokers.
The SPX will be hard-pressed to make new
highs
without the semis and brokers, which are both leading market indicators, and
as
of Friday, neither looked good.
Have a good trading day,
Kevin Haggerty
