Trap Door Long Bias On Any Weakness
What Tuesday’s Action Tells
You
It was the second trend day down in
succession to
start the new year as the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) closed at 1188.04, -1.2%. The
Generals are very active with NYSE volume 1.72 billion shares, and it was
mostly
to the downside with a volume ratio of 11 and 1.45 billion shares down.
Breadth
was negative at -1728.
Yesterday was also the second day breaking
down
from the rising wedge where the daily chart had indicated a downside
resolution
with a negative divergence in the RSI oscillator since the 11/17 high (see
today’s chart). The 12/28 commentary (“The Rising Price, Narrowing
Range Red
Flag Warning” ) said the resolution would follow any push into year-end
and the
first week of January. Keep in mind that the SPX had a year-end rally of
+11.7%
off the 10/25 1090 low and +15% from the 08/13 1061 low with virtually no
retracement at all. In two days, the SPX is -2.6% high-to-low (1185.39) and
the
media has already got their bear suits on. It never changes with the empty
suits. The Dow was -0.9% to 10,631, the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) -2.1% to 2108
and
the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) -1.8% to 38.78.
In the leading red sectors, it was semis (SMH
-2.5%), brokers (XBD -2.0%) and cyclicals (CYC -1.6%). The TLT lost 1.1% to
87.81, but that is a good thing since it gets shorted on any strength above
89.
The most recent daily chart RST sell trade was below 89.84 with entry on
12/16
with a price objective below 86 and the stop now lowered to 88.85.
The semis haven’t disappointed us as the
initial
2005 focus. The volatility has kicked in as the SOX re-crossed the 40-week
EMA,
now 426, to the downside. Yesterday’s high was 426.10, then it went south to
close at 410.36 after hitting a 406.08 low. This set up the SMHs for a move
down
from 32.93 to 31.39, closing at 31.90. The SOX 40-week EMA was an
anticipated
price action level, and it was. The SOX started its fall rally off the 09/08
351
low, advancing +29.3% to 454 on 12/03 and has declined -10.6% so far to
yesterday’s 406.08 low. Today’s levels of interest on the SOX are 403 and
390.
The
(
SPY |
Quote |
Chart |
News |
PowerRating) reversed the 120.10 20-day EMA
after a failed 1,2,3 Lower Bottom/RST and traded down to 118.44, closing at
118.83. The first downside levels in play are 118 – 118.10, then down at
117.
The SPX .236 retracement to 1090 is 1188, where it closed, then the stronger
level of confluence is at 1180 – 1181 which includes the 50-day EMA.
Have a good trading day,
Kevin Haggerty
