Read The Tape, Study The Screens, Then Go To Price Patterns
What Thursday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) had another
narrow-range
day at 7.2 points, but with better travel range than that. It’s now a
four-day
range with all the opens and closes within the Dec. 1 bar. The high four-day
close is 1070.12 and the low close is 1064.73, so I would say the buyers and
sellers have played to a draw in price up to this point, but as you can see
from
the table, the short-term overbought condition is getting worked off in the
sideways range. Does that mean it’s weak and going to go down? No, it
doesn’t
necessarily. You have to assume that the better probability is that price
will
resume the direction of the trend in most cases until proven
otherwise.
The average close over the past four days is
about 1068, rounded off, which is the .382 retracement to the 1553 SPX
all-time
high from the October 2002 769 low. And there is other confluence in the
zone,
as mentioned in the Dec. 3 commentary. This has been a sideways trading
action
and in and around the 1060 -1075 trading range is also a good probability.
In
the absence of overt news, I think the lowest probability is any significant
selloff through year-end for obvious reasons. The Generals are not doing so
well
with their press clippings lately, with more to come, so I would say there
is
more than a strong incentive to show good numbers at year-end. If they can
just
maintain the status quo right now, that will happen; and if they can push
price
some, it would be a bonus.
From the hedge fund side, many of them are having
good years, but you have to remember that many of them are in tough catch-up
situations after two or three losing years in succession. Most don’t get paid
until they make back what they have lost, and for some, that is not going to
happen. There has been no IPO game either to inflate their profits, so they
are just doing what you are, but with a whole lot more information on supply/demand
from the sell side (brokerage firms). I guess that also applies to those hedge
funds that were arbitraging the mutual fund net asset value (buying tomorrow’s
newspaper today). Net net, if they can push price, they will.
The major indices all declined yesterday from
0.4% – 0.6%. In the major sectors, the OIH ripped it at +3.4%. Our energy
selections,
(
UCL |
Quote |
Chart |
News |
PowerRating),
(
APA |
Quote |
Chart |
News |
PowerRating) and
(
MUR |
Quote |
Chart |
News |
PowerRating) — from the Dec. 1 commentary
—
have come out of their flag patterns since Dec.1, with UCL +4.0% yesterday
alone, with APA +3.3% and MUR just closing out of its flag pattern yesterday
at
+0.7%. The drillers obviously did well, but I prefer those energy stocks
that
have a natural gas play also.
You have heard me say the elephants can’t hide,
and it doesn’t matter whether it’s an auction market or electronic market, they
will always be visible. In the Dec.
3 commentary, I mentioned the common thread in some retail stocks from the
previous day which I call the elephant’s footprints. They were:
(
BBY |
Quote |
Chart |
News |
PowerRating),
(
DDS |
Quote |
Chart |
News |
PowerRating),
(
MAY |
Quote |
Chart |
News |
PowerRating),
(
FDO |
Quote |
Chart |
News |
PowerRating),
(
KSS |
Quote |
Chart |
News |
PowerRating) and
(
DLTR |
Quote |
Chart |
News |
PowerRating). We got trade-through entries
in most of those stocks that day. If you want to see the elephants in full views,
check the charts for those stocks from yesterday’s trading and the downside
continuation in these retail stocks, with the exception of KSS, which had an
up day, but had led on the downside from a 56.65 retracement back up to the
200-day EMA, then hit a 44.50 intraday low on Dec. 3, but it was a gap down
and no trade-through entry. Also under their 200-day EMAs now are FDO, DLTR
and
(
WMT |
Quote |
Chart |
News |
PowerRating). The RTH has been rounding over and is sitting in a classic head-and-shoulder
pattern which should be on your watch list.
The key point is read the tape, study the screens,
and get a handle on what is happening, then go to your price patterns for entries.
I sense some of you start on the other end, wasting your time with backtesting
and indicators and what you think is some new magic formula. Not going to happen,
folks. Every pattern I use, both reversal or continuation, is based on how the
institutions, market makers, specialists and hedge funds play the game. In fact,
they are the game, that is why these patterns are effective all the time, not
just something that works in one kind of a market, and not in another kind of
a market.
| size=2> |
Friday
11/28 |
Monday
12/1 |
Tuesday
12/2 |
Wednesday
12/3 |
Thursday
12/4 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
1060.63
|
1070.47
|
1071.22
|
1074.30
|
1070.37
|
| color=#0000ff>Low |
1056.77
|
1058.20
|
1065.22
|
1064.63
|
1063.16
|
| color=#0000ff>Close |
1058.20
|
1070.12
|
1066.62
|
1064.73
|
1069.72
|
| color=#0000ff>% |
-.02
|
+1.1
|
-0.3
|
-0.2
|
+0.5
|
| color=#0000ff>Range |
3.9
|
12.3
|
6
|
9.7
|
7.2
|
| color=#0000ff>% Range |
37
|
97
|
23
|
0
|
91
|
| color=#0000ff>INDU |
9782
|
9899
|
9854
|
9873
|
9931
|
| color=#0000ff>% |
+0.2
|
+1.2
|
-0.5
|
+0.2
|
+0.6
|
| color=#0000ff>Nasdaq |
1960
|
1990
|
1980
|
1960
|
1969
|
| color=#0000ff>% |
+0.4
|
+1.5
|
-0.5
|
-1.00
|
+0.4
|
| color=#0000ff>QQQ |
35.34
|
35.90
|
35.69
|
35.26
|
35.63
|
| color=#0000ff>% |
+0.2
|
+1.5
|
-0.6
|
-1.2
|
+1.1
|
| color=#0000ff>NYSE | |||||
| color=#0000ff>T. VOL |
487
|
1.35
|
1.38
|
1.42
|
1.38
|
| color=#0000ff>U. VOL |
280
|
1.08
|
585
|
609
|
688
|
| color=#0000ff>D. VOL |
193
|
246
|
779
|
783
|
689
|
| color=#0000ff>VR |
59
|
81
|
43
|
44
|
50
|
| color=#0000ff>4 MA |
72
|
71
|
64
|
57
|
55
|
| color=#0000ff>5 RSI |
69
|
92
|
70
|
65
|
72
|
| color=#0000ff>ADV |
1848
|
2417
|
1614
|
1518
|
1605
|
| color=#0000ff>DEC |
1207
|
882
|
1634
|
1749
|
1641
|
| color=#0000ff>A-D |
+641
|
+1535
|
-20
|
-231
|
-36
|
| color=#0000ff>4 MA |
+1134
|
+1115
|
+810
|
+481
|
+312
|
| color=#0000ff>SECTORS | |||||
| color=#0000ff>SMH |
+1.1
|
+0.6
|
-0.7
|
-1.8
|
-0.6
|
| color=#0000ff>BKX |
-0.1
|
+0.9
|
-0.1
|
-0.4
|
-.03
|
| color=#0000ff>XBD |
+0.2
|
+1.2
|
-.08
|
+0.6
|
-0.9
|
| color=#0000ff>RTH |
+0.3
|
+.06
|
-2.2
|
-0.8
|
-0.4
|
| color=#0000ff>CYC |
+0.3
|
+1.8
|
-0.4
|
+0.4
|
-.05
|
| color=#0000ff>PPH |
-0.5
|
+1.6
|
-0.2
|
+0.5
|
+0.2
|
| color=#0000ff>OIH |
+.02
|
+0.7
|
+1.2
|
-1.3
|
+3.4
|
| color=#0000ff>BBH |
+0.2
|
+2.1
|
+0.5
|
-0.4
|
-0.3
|
| color=#0000ff>TLT |
-0.9
|
-0.5
|
+0.4
|
-0.4
|
+0.2
|
| color=#0000ff>XAU |
+1.8
|
+2.3
|
+.07
|
-.07
|
-2.6
|
For Active Traders
In spite of the SPX narrow range yesterday, we
had three defined reversal trades. Not moonshots, mind you, but just lunch pail
trades that were green. That’s the daily objective, isn’t it? I have included
the SPX chart with those trades from yesterday. The first was the RST long entry
above 1065.43. I had told you RST veterans going in that it was a setup taking
out Tuesday’s 1065.22 low, which it did late Thursday afternoon with a 1064.73
low. Yesterday it gapped open above that bar, ran to 1066.93, but came back
in, then traded above 1065.43 for good trade-through entry. I realize that many
of you don’t know the RST, as it is only taught in the seminars,
but I do this as a continuation TGIII
seminar and manual as an ongoing education workshop following the seminar.
The RST ran to 1069.80, just under the .618 retracement level to the 1074.30
rally high. There was a three-bar reversal of the last three lows below 1069.21,
so you had to make a decision, and with almost 4 points in profits at that points,
you certainly had taken something off the table.
The second trade was a 1,2,3 top with trade
entry
below 1067.95. It had gone sideways to the “3” point, but the
trend entry below
1067.95 was very clear. The momentum indicator was headed down as price
moved
sideways, so that helped you make your entry decision.
The third trade was a 1,2,3 double bottom
after
making a new intraday low at 1063.16 and 1063.18. There was a positive
divergence in momentum prior to entry above 1065, as the SPX took off on the
2:55 p.m. ET bar to begin a last-hour rally that carried the SPX up to a
1070.37
high, closing at 1069.72. You can now see why it was a much better travel
range
day than the 7.2 actual daily range.
The last-hour rally saw the
(
SMH |
Quote |
Chart |
News |
PowerRating)s, which
were down 2.8% to a 41.75 low, trade up in the last hour to close at only
-0.6%.
After the close,
(
INTC |
Quote |
Chart |
News |
PowerRating) was trading down -3.5% to 32.36 on their
mid-whatever routine they go through constantly, and that’s when I packed it
in
for the night.
Today’s
Action
We start it out today with the futures big
red,
with the SPX down 6, the Dow down 45 and the Nasdaq -15. I consider that a
positive, as our better long setups will come on retracements and any
short-term
oversold condition because the primary trends are up. Put your Trap Door and
volatility band hats on.
Have a good trading day, and have a great
weekend.
Kevin Haggerty
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