No Fifth Leg Continuation Unless Semis Participate
What Friday’s Action Tells
You
The major indices closed near their highs on
Friday with almost all of the gains coming by 11:30 a.m. ET after the early
down
into the 10:00 a.m. time period. The SPX
(
$SPX.X |
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Chart |
News |
PowerRating) is back to the 1206
retracement level, closing at 1205.30, +0.7%. The Dow
(
$INDU |
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PowerRating) was
+0.4% to
10,796, Nasdaq
(
$COMPQ |
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PowerRating) +1.2%, and the
(
QQQQ |
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Chart |
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PowerRating), bolstered by the
semiconductors, +1.5% to 37.70.
The semis led the primary sectors with the
(
SMH |
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Chart |
News |
PowerRating) +3.5%, while energy was strong again with the
(
OIH |
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Chart |
News |
PowerRating) +1.6%, as
was
the XBD. Gold advanced for the third day with the XAU +1.9% and is +6.9% in
three days on a bounce from the .618 retracement zone to the May lows.
(
NEM |
Quote |
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PowerRating)
mining also reversed off its .618 retracement level to the 34.50 May
low.
NYSE volume was 1.56 billion shares, with the
volume ratio 77 and breadth +1320. It was an across-the-board advance as all
sector SPDRs finished green. The small cap (IWM +1.6%) and QQQQ (+1.5%) led
the
major indices.
It was a very successful day for daytraders
of
the major index futures/proxies. The
(
SPY |
Quote |
Chart |
News |
PowerRating) was an RST entry above
119.55,
running to 121.04 by the 11:30 a.m. bar. The QQQQ was a double bottom at the
36.93 level, which included other symmetry to make the trade decision. The
(
DIA |
Quote |
Chart |
News |
PowerRating) was also a Trap Door to a 107.14 low and the 240 EMA before
trading up
to a 108.39 high by 11:30 a.m. The previous high close in the rally was
108.40.
The biggest swing in my composite since 01/24
was
clearly the semiconductors, with the SMH going from -121 to +93 on Friday
for a
gain of +14.3%. That is vs. the SPY, which went from -75 to +89 and has
gained
+3.6%. The strongest continuation of strength from 01/24 was definitely
energy,
with the XLE going from +84 to +206 for a gain of +10.2%. The OIH continued
from
+131 to +174 and a gain of +7.9%. The XLE is always stronger when the
exploration and refining stocks are strong, along with the drillers and
equipment stocks.
The strongest 5 RSI numbers last week were
the
XLE 89, OIH 84, DIA 82, SMH 78, XAU 76, XLF 75 and SPY 74. The weakest were
BBH
52, TLT 53, RTH 54, XLY 58, XLK and XLP both 59, with the QQQQ at
60.
The market enters this week’s mid-February
time
zone on the highs off the 01/24 lows, so traders must be alert for some
short-term reversal opportunities, especially if the SPX 1217.90 high is
taken
out and/or the 10,868 Dow high. That is not a necessity, but it will put
price
in the RST and 1,2,3 Higher Top zone. 02/16, 02/17 and 02/18 are the
strongest
time dates this week. If a market advances/declines significantly into a key
time zone, there is a reversal about 75% of the time, the duration and
extent of
which can’t be known. The other 25%, it could churn a few days, then make
another continuation move in the direction of the previous trend. There is
another trading day count time period from measuring the SPY 06/25 and 10/06
highs, which is 02/24 and 02/25.
The QQQQ remains in a 17-day trading range
between the 38 resistance level and the 200-/233-day EMAs. If the next SPX
advance is to have any credibility, the NDX 100 must get going above its
EMAs
like the SPY and DIA are right now.
The SMH made a strong move on Friday +3.5% on
a
significant volume increase (44.7 million), closing at 33.93, above its
200-/233-day EMAs and also its 12-month EMA at 33.60, which now becomes the
first downside focus line for daytraders. You have all read here before
several
times that there will be no continuation of the fifth leg of this bull cycle
unless the semiconductors join in the advance, so Friday’s action was a
positive
and it was also an eight-month high close for the SMH.
This is being recorded Sunday for
Monday.
Have a good trading day,
Kevin Haggerty
