Key Time Zone Gave You Good Trades
The knife down for the
major indices came at 2:00 PM and the SPX traded down from 1170.37 to
an intraday low of 1162.98 before closing at 1166.22, -1.1%. It was almost
comical listening to CNBC giving reasons for the decline yesterday. The Dow was
-1% to 10,281, Nasdaq -0.9% to 1963, and QQQQ -0.7% to 35.77. NYSE volume
increased some to 1.47 billion shares but the volume ratio was just 15 and
breadth -1157. Coming into this week, the 4 MA of the volume ratio was 65
on Monday with the 4 MA of breadth +760. All of the primary sectors were red,
led by the OIH, -2.4%, XLE -1.7%, and the XBD -1.9%. The rest of the sectors
were in-line with the SPX. The TLT ended +0.7%, with the XAU, -2.1%.
Yesterday’s action in the brokers highlights the
amateur reaction to the ETrade/Ameritrade rumors, which in reality is a
non-event as both are simply lucky to still be in business. Yesterday brokers
like Bear Stearns
(
BSC |
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PowerRating), Lehman Bros.
(
LEH |
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PowerRating) and Goldman
Sachs
(
GS |
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PowerRating) all declined over 3% on above average volume, while Merrill
Lynch
(
MER |
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PowerRating) was -2.6% on slightly above average volume. The Generals did
not react with cash to that merger hype as the major brokers advanced less than
half of the XBD gain that day and it was on well below-average volume. This
indicates that the retail and amateur hedge fund types bailed out on stocks
bought on the announced news of dubious value.
Another common thread yesterday from the S&P 500
screen on my commentary page was the transportation stocks like BNI, -3.3%, NSC,
-2.9%, and CSX, -1.9%, backing off as group, but it was on below-average volume.
Copper bellwether Phelps Dodge
(
PD |
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PowerRating) was -2.9% on well below-average
volume. This was another failed attempt to re-cross the 200/233-day EMAs. The
stock looks like it wants to head further South.
There were excellent intraday reversal short
trades yesterday in the major indices after the early gaps down and contra move
back up to resistance. You know it is a key time zone this week and the rally
was 14 days old back to various resistance levels and as described in
yesterday’s commentary the bias was to the short side. After the contra move up
by the DIA from the 12-month EMA of 103 (vs the 102.94 intraday low) to 103.49
(12-month SMA 103.40), the DIA reversed down to a 102.50 low. The QQQQ made a
contra move from 35.72 to the initial resistance level and 35.96 intraday high
before resuming the direction of the open and a 35.62 low. The DIA, QQQQ and
Nasdaq are all below their longer-term moving averages which have rolled over
since the decline from the 03/08 key time zone highs, so there are no position
long decisions to make at these levels until that changes or else they trade
much lower. The SPY hit 116.39 intraday low yesterday and closed at 116.60,
which is above its longer term 200-day EMA at 116 and 233-day EMA at 115.34 so
they are the immediate downside intraday focus levels for today.
Have a good trading day.
Kevin Haggerty
P.S. I will be
referring to some charts here:
www.thechartstore.com in the future.
