Here’s How Bonds Come Into Play Now
What Thursday’s Action Tells
You
The election celebration loosened up the
Generals’ early November money and the SPX made significant breakouts yesterday,
closing at 1161.67, +1.6%. The 2/4/04 high daily close was 1157.76, but the
early entry line was above the 1144.94 2004 high monthly close. RST players who
took the position trade after the 1090 low at the key time and price zone
(200/233-day EMAs) now have plenty of flexibility with trailing stops.
The Dow was +1.7% to 10315, Nasdaq +1% and QQQ
+0.6%.
NYSE volume mirrored Wednesday at +1.79 billion with the same positive volume
ratio of 82 and a slight increase in breadth to +1848. That should excite the
always late-to-the-party-longs chasing the obvious, while the much higher
probability lower risk entries at the lowest common denominator can just trail
stops with a nice profit cushion.
Although the SMH lagged the market at +0.8%, the
other key sector gains were very positive, with the RTH +2.8%, CYC +2.4% and XBD
+1.9%. That is the continued growth sector move, but the SMH must join the
parade.
The TLT (bond proxy) closed green for the 3rd day
while the US dollar declined, which is now into the extended minus standard
deviation zone and of course certain currencies like the Canadian dollar are
extended to the plus standard deviation levels. Forex position traders, take
note.
For Active Traders
The key anticipated acceleration came as the SPX
traded to 1145.97 on the 10:05 AM bar, back to 1142.34, then reversing the
1144.94 high 2004 monthly close and trading up to an 1161.67 close. The previous
high daily close was 1157.76.
The SPX had a positive divergence on the opening
in the Flip Top as the QQQ, Nasdaq and SMHÂ all declined into the 10:20 AM
time period. For you RST players that set up the QQQ with entry above 37.19
which traded up to 37.78, closing at 37.62.
For Today
Position traders are just trailing stops as the
Generals determine how much more. Yesterday was the 8th rally day off the 1090
low (key time and price zone) and the SPX/SPY price is into an extended standard
deviation zone (seminar members, check all your daily time standard deviation
periods.
Today is the first Friday of the month jobs
dance, so if media hype is positive then the first trade for day traders will
obviously be
Trap Doors.
Any rally in bonds will be shorted because the US
dollar will continue to decline and Greenspan will raise rates again to keep the
dollar from any downside air pocket. He can only keep rates artificially low for
so long and now that the election is over he has more room. If the economic news
remains, good stocks continue to the upside, then short bonds could give you a
good two-way play..
Have a good trading day.
Kevin Haggerty
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