Position Traders: This Is The Better Probability
What Tuesday’s Action Tells
You
The market action was good for daytraders
yesterday as you caught a morning downtrend, then the afternoon mark-up into
month-end that started in earnest on the 2:35 p.m. ET bar. The SPX
(
$SPX.X |
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Chart |
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PowerRating) closed at 1104.24, +0.5%, as did the Dow
(
$INDU |
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PowerRating) at
10,174. The SPX churned just above the 1094 200-day EMA from the 11:15 a.m.
bar
until the program lights went green on the 2:35 p.m. bar. The actual move
into
the close was about +9.5 points low-to-high. Thank you, Generals. And the
game
goes on.
NYSE volume was 1.14 billion, the volume
ratio 68
and breadth + 1318. It was the XAU +2.1% and
(
OIH |
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PowerRating) +1.9% (with the focus
stocks doing well once again) leading the green team. Yields declined as the
(
TLT |
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PowerRating)s — long bond proxy — were +0.6% and has finished green five of
the
last six days as the herd reacts to each change in economic reports on a
daily
basis.
The closing mark-up couldn’t quite get the
SPX to
the 2003 closing high of 1111.92, but it was enough for the
(
SPY |
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PowerRating)/futures
traders to have a good day.
For Active
Traders
The major indices made an early move up to
the
previous day’s Slim Jim resistance and then headed south after making the
initial high on the 9:45 a.m. bar for the SPX, which was 1102.65 vs. its
Slim
Jim lower line at 1102.90. I have included the SPY five-minute chart which
has
the 110.92 9:45 a.m. high vs. the 110.91 Slim Jim breakout level from the
previous day. There was a three-bar reversal short entry below 110.81 that
carried down to 110.24 and the 1.272 Fib extension of 110.32. RST players
probably covered (correctly) and went long, but were stopped out at -.10 to
-.12, giving some back from the initial short trade.
Price hit the 110.16 1.618 extension to the
penny, and then reversed. Your next entry was above 110.25. Price carried to
110.44 before heading south again to the 110.11 low, giving you a worst case
at
breakeven, so no harm done. This 110.11 low was a second RST and then ran to
110.35 before the double bottom at 110.10. Having experienced the first two
longs, you probably got out at breakeven again, or maybe even -.10. At this
point, you were still well into the plus column from the initial short
trade.
But if not, then you probably packed it in
after
the third long attempt, not caring about a potential month-end game into the
close. The 2:35 p.m. program time and fourth attempt proved to be the big
winner. To have stayed involved and made the three – four long probes, you
have
to understand sequence and have confidence that there was a decent
probability
of a late move into month-end. This was all made easier if you took the
initial
defined short entry below 110.81. The three lows made after 110.24 were all
made
on very light volume.
Today’s
Action
It has been a trading range game of levels in
conjunction with short-term oversold and overbought conditions. Most of
these
levels were outlined in yesterday’s commentary. If the SPX 1108.60 swing
point
high is taken out, the next zone is the 1112 .50 retracement to 1163.23 and
1114, the .618 retracement to 1146.34. The zone after that is the upper
channel
line from the 1163.23 high, which is 1135 – 1140, with 1141 being the .786
retracement to 1163.23 from 1060.92. That’s just a +2.9% move above 1109 to
1141, but the downside potential in September with all that is going on
could
mean new lows to the 1013 .382 retracement zone that the SPX hasn’t seen yet
on
this decline since the March highs.
Net net, it means that position selling into
higher resistance is a better probability, but on an intraday basis, you
obviously continue to play both ways.
Have a good trading day,
Kevin Haggerty
