Trading focus this week on semiconductor divergence
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Six straight up-days
into Triple Witch expiration and the SPX closed at new highs of
1307.25. This run up follows five of six days down into the 1268.42 key time
period low. Energy stocks led the advance last week with the OIH +5.1%, XAU
+3.9% and $CYC +3.7%. The semiconductors declined, with the SMH -1.1% last week.
Most all of the Above the Line individual stocks that were in contracted
volatility or retracement patterns are now extended 5-7 days, so position
traders should just walk away for now. Daytraders should capitalize on the
First Hour strategies after gap openings/early advances. The strategies you
are getting most often during this advance are
Trap Doors and volatility band trades, in addition to some
RSTs mostly in the energy stocks because of the daily volatility.
NYSE volume on expiration Friday expanded to 1.98 billion shares and the SPY
gained +0.2% to 1307.25 and was +2.0% on the week as was the Dow to 11,280. The
volume ratio was 59 on Friday and breadth +415. The MA VR is 67, breadth +996
and the 5 RSI is 81.21, so keep your hands in your pocket.
The semiconductors is the only primary group that
is trading at a potential reversal level with the SPX extended as it is. Unlike
the major indices, the SMH has continued to decline from its 1/12 high of 40.64
and it hit an intraday low of 35.19 on Friday. That is a -13.4% decline vs. the
SPX, which hit a 1294.90 high on 1/11 and went out Friday at 1307.25. This
divergence will not last, so traders should make the semis a focus this week.
There are 10 trading days left in the quarter, and the Generals will always push
price if they can, so any decline this week will probably be shallow.
Have a good trading day,
Kevin Haggerty