The Two Best Games At The Casino

four weeks on weaker breadth and volume ratio, and as all good traders know, had

reached an extended nine-month standard deviation zone to which you had a heads

up. The
(
SPY |
Quote |
Chart |
News |
PowerRating) move from the 118.26 07/07/05 low to the 124.74 rally high is

the fifth wave up (daily chart) from the 113.55 04/20/05 low, after which, there

was an RST long entry above 115.63. There was other sequence as 124.55 is the

1.618 Fibonacci extension of the 121.94 (07/22/05) to 118.26 leg, which is the

fourth wave of this current move. It goes to reason that traders are not

surprised that the major indices caught an air pocket day down from that zone,

three 1219.59 high (06/22/05). Both 50-day moving averages (EMA and SMA) are at

1218.57 – 1217.72 with the 89-day EMA at 1208, so any quick reflex up today from

this minor price support zone should not surprise daytraders. NYSE volume was

not heavy at 1.37 billion shares, but it was 1.14 billion shares down and 233mm

up for a volume ratio of just 14 which is the lowest one-day volume ratio since

01/04/05 when it was 11. When the Generals walk away for the day, it doesn’t

take much volume to extend the air pocket on the downside. Breadth was -1327

yesterday with the 4 MA neutral at +86 and 4 MA of the volume ratio 44, so it is

not short-term oversold yet. The Dow was -1.1% to 10,513, the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) -1.6%

yesterday with the RTH -2.4%, $CYC -2.2% and XLB -1.9%. Energy declined again

from its extended standard deviation level with the
(
OIH |
Quote |
Chart |
News |
PowerRating) -1.8% and is now

-4.2% the past three days. We should be so lucky to have crude oil sell off

again because it would set up good short-term long positions as it did in the

last decline, which set up the Generals’ Pullback trade at the 84 – 85 200-day

EMA zone when crude declined to 50 – 48. However, initial price support for the

OIH is currently 108 – 107, having closed yesterday at 113.70. The
(
SMH |
Quote |
Chart |
News |
PowerRating) was

-1.4% and continues to get pushed around by a few large hedge funds as there

have been seven alternating minus and plus days into yesterday. They are as

follows:  -0.6%, +0.9%, -0.6%, +0.6%, -1.8%, +1.1% and -1.4% yesterday. The

semis are one of the current two best games at The Casino, along with energy,

121.50 (.50 retracement to 118.26) and 121 – 120.75. The Dow closed at 10,513,

just below the 10,520 89-day EMA and 10,529 200-day SMA with the 200-day EMA at

10,460. The Dow has ranged out the past 24 days from 10,719 – 10,525 into

yesterday’s 10,510 low and unlike the SPX, has not taken out the previous rally

high of 10,984 (03/07/05) which is certainly a negative divergence. The same is

true for the Dow Transportation index (3705 close) which has also failed so far