Anticipate The Level But Trade The Price Action
What Tuesday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) traded to an 1180.43
intraday low and closed at 1183, -0.6%, as did the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) to
10,556.
NYSE volume repeated at 1.49 billion with the volume ratio 24 and
breadth -908.
The sectors were all red, led by the
(
SMH |
Quote |
Chart |
News |
PowerRating),
-2.1%, accelerated by
(
AMD |
Quote |
Chart |
News |
PowerRating)‘s negative noise. The semis continue to be
the
key 2005 volatility focus, as anticipated, and have provided excellent
opportunity at that 40-week EMA (previous commentaries). The empty suits are
now
hyping
(
INTC |
Quote |
Chart |
News |
PowerRating) news this morning. The brokers (XBD) were -1.3%, with the
(
BBH |
Quote |
Chart |
News |
PowerRating) -1.9%.
The normal sequence was in sync yesterday
with
the somewhat negative economic news, so the bonds advanced, with the
(
TLT |
Quote |
Chart |
News |
PowerRating)
+0.6% and the US Dollar declined vs. foreign currencies, while gold advanced
with the XAU +0.9%.
Both
(
SPY |
Quote |
Chart |
News |
PowerRating) anticipated RST buy setups
from
yesterday’s commentary kicked in, with the first RST setting up below
118.34,
giving entry at 118.30. This failed at 118.55 and reversed down, so at worst
case, the trade was scratched. The second RST buy came after Friday’s 118.13
low
was taken out, and the SPY hit a 118 low, which was the key focus level. The
SPX
traded to 1180.43 vs. its 1180 – 1181 focus level and just beyond the
1181.10
-1.28 volatility band. Net net, the RST entry was above 118.11 and the trade
ran
to 118.74 and the 240 EMA (five-minute chart) before failing and trading
down to
a 118.18 close. It was a choppy day if you trade the S&P futures/SPY,
but if you
are an RST player, you caught a decent move relative to yesterday’s SPX
action.
Similar RSTs were also there in the
(
DIA |
Quote |
Chart |
News |
PowerRating)/YMs.
The focus list stock
(
ROK |
Quote |
Chart |
News |
PowerRating) with the
eight-bar
retracement to the 50-day EMA led the big-caps at +12.1% after the company
significantly raised their first quarter numbers. Net net, there was no
trade-through entry as the stock gapped open to 49.85 from 46.26 with no
intraday retracement. Good things happen to “Above the Line”
stocks. The other
leading focus stocks were
(
QLGC |
Quote |
Chart |
News |
PowerRating), +7.9%,
(
NTAP |
Quote |
Chart |
News |
PowerRating), +3.2%, and
(
CMX |
Quote |
Chart |
News |
PowerRating),
+3.2%, to new highs.
So far, the mid-January anticipated time
zone,
01/10 – 01/17, has seen some choppy action between the 1194.78 Monday high
and
yesterday’s 1180.43 low. The 11th and 17th are the strongest time dates of
the
period. This time zone occurred with the rising SPX wedge that was broken to
the
downside and the daily chart negative oscillator divergences after a
significant
year-end move off the 1090 10/25 low (Red Flag Warning —
12/28 commentary).
The SPY has been hanging at the 118 key price
level for five days with lows of 118, 118.26, 118.13, 118.34 and 118. Each
low
has provided daytraders opportunity. In fact, there have been six RST trades
since Friday alone which captured most of the intraday travel range over the
past three days. The .236 retracement to the 08/13 SPY low is 118.05 and the
50-day EMA 118.16. A break of the 118 level would seek the .382 117 retracement
to
the 10/25 low, in addition to the lower part of the four-week trading range
from
mid-November to mid-December. The 5 RSI looks to be setting up in a positive
divergence and in the same zone as the previous four rallies of note this
past
year in March, May, August and October.
The three-month rising EMA for the SPX is
1181.36
and has been in play since December with the primary longer-term rising
12-month
SMA and EMAs at 1138.29 and 1134.70 which serves many conservative investors
as
a 4.0% – 5.0% trailing stop right now, so you don’t even have to read the
newspaper, let alone listen to the empty suits.
Have a good trading day,
Kevin Haggerty