The Reality Of This Market
What Wednesday’s Action Tells
You
The market action saw both the SPX
(
$SPX.X |
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PowerRating) and Dow
(
$INDU |
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I
did not particularly like the action because the Nasdaq
(
$COMPQ |
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up
just a point and the
(
QQQQ |
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(
SMH |
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was -0.4%,
while the XBD and RTH were only +0.2%. The energy led with the
(
OIH |
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+1.5%,
and that is not leadership we need after Tuesday’s decline.
NYSE volume was 1.5 billion shares, the volume
ratio 70 and breadth +906 coming off Tuesday’s 4 MA of the volume ratio at 36
and breadth -984. It is a coin flip the next few days whether the negative
psychology trailing the US Dollar, OIL and PPI blip (Remember the 80,000
jobs
report?) outweighs some small end-of-the-month-and-first-few-days-in-March
activity by the Generals.
The market action, however, was positive
again
for daytraders following the gap up opening for the
(
SPY |
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PowerRating). This was
followed
by a Gap Pullback long setup on the re-cross of the 50-day EMA at 118.89.
The
SPY then made a 50% retracement to Tuesday’s 120.45 high, hitting a 119.57
intraday high right at the 240 EMA and closing 119.45 (see chart).
There was an SMH RST buy around 2:00 p.m. ET
with
entry just below 32.80 and traded up to 33.18, closing at 33.06. The QQQQ
also
had an RST buy at about the same time, but only ran to 37.05, closing at
36.94.
The XLB made a nice move after a Gap Pullback to the 480 EMA with entry
above
30.24 which ran to 30.58 and closing there. The XLB, +1.5%, was led by
(
DOW |
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(
APD |
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PowerRating),+ 2.0%, both to new highs, and
(
PPG |
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PowerRating), +2.0%.
These commodity stocks have been very strong, so the PPI blip certainly
helped.
In addition to those stocks,
(
CSX |
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(
NSC |
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(
BNI |
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PowerRating) all advanced
more than 2.0% with CSX leading at +3.8%, so that tells you a story.
Needless to
say, the $CRB broke out of a trading range to new rally highs and is now
+63%
from its 10/16/01 low.
The mode right now has switched to longs
crossing
their fingers and shorts looking to sell strength, and the reality is that
the
major indices are too far above a key price zone and too low for a
higher-probability sell zone.
Have a good trading day,
Kevin Haggerty
