The 90%-60% Rule Gave A Windfall To Sequence Traders
What Tuesday’s Action Tells
You
The new crowd psychology from the time-zone
high
of SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) 1212.44 and five straight down days in the
(
TLT |
Quote |
Chart |
News |
PowerRating)
at
-2.8% turned the hourglass upside down for several sectors, like the XBD,
RTH,
BKX and XLF. Still on the extended plus side are the XAU, XLE and XLB. The
air
pocket has also dropped the
(
SPY |
Quote |
Chart |
News |
PowerRating) and
(
DIA |
Quote |
Chart |
News |
PowerRating) to the three-month -1.0
zone.
Needless to say, the decline yesterday was a
windfall for
sequence traders as the “90% – 60%” rule kicked in,
and you caught
both the initial long contra move followed by the gap pullback short, which was a
real
bonus.
NYSE volume expanded to 1.7 billion shares as
the
herd all trampled the same grass. The volume ratio was 16 and 4 MA now 36,
while
breadth was extreme at -1925 and the 4 MA -984. Yesterday’s decline has the
short-term numbers entering levels we like to see develop coming off the
rally
highs. They can get more extended in this short-term oversold zone. The SPX
and
Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) were -1.5% and -1.6% to 1184.16 and 10,611. The
(
QQQQ |
Quote |
Chart |
News |
PowerRating)
was -1.2% to 36.89 and the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) -1.4% to 2030. The early
contra rally after the discount opening ended just before 11:00 a.m. ET. The
only green sectors during that move were the
(
OIH |
Quote |
Chart |
News |
PowerRating),
(
PPH |
Quote |
Chart |
News |
PowerRating) and the
semis,
with the
(
SMH |
Quote |
Chart |
News |
PowerRating) getting up to about +2.0% at one point during the day,
but it
eventually caved with the afternoon SPX knife down, closing at -0.2%. The
BKX
and XBD were in line with the SPX, while the RTH was -2.3%, CYC -1.9%, with
the
TLT -0.4% and the XAU +3.8%.
The early futures are flat to small green,
but
any herd mentality sending price to an early morning discount will provide
intraday long opportunities. Price for the SPX and Dow is right in the
50-day
EMA zones after three days down, but the EMA sequence remains “Above
the Line”.
The DIA gave us an RST sell below 108.09, but the SPY/SPX did not make a new
rally high. The SPY RST buy pattern can’t set up unless the 116.37 01/24 low
is
taken out, so unless that happens, you work off the short-term oversold
conditions if you’re trying to catch a good reflex.
Have a good trading day,
Kevin Haggerty