‘112’ Again
Yesterday
was one more time, as we got
an encore performance in the
(
SPY |
Quote |
Chart |
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PowerRating)s thanks to emotional reactions relating
to Enron, Tyco
(
TYC |
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PowerRating), and every other company that all of a sudden becomes
suspect. Don’t you just love the hypocrisy of Wall Street analysts and corrupt
politicians regardless of party? Enron’s shell game gets blown up and most
politicians rush to give back the payola they got from Enron, but of course, if
Enron’s game wasn’t deflated, you never would have heard a word. Now all of a
sudden, the analysts’ pencils get sharper. Right. It hasn’t stopped them from
the price target hype, however, because there are probably many of you out there
that still think you can figure out the fundamentals or believe gospel what an
analyst says. My condolences. I hope you make it through the year.
The SPYs once again
reversed 112 to the downside and declined all day to a 109.45 intraday low. I
hope you played it because it doesn’t get more defined than that. The SPY low so
far in the decline is 108.40 on Jan. 30. You have all the parameters for below
the .38 retracement for all the major indices, so you are prepared in advance to
observe the price action if and when they are approached and you decide whether
you take reversal trade or not. Emotional
selling leads to quick reflex rallies, and I expect that today, or certainly by
tomorrow. Look to play the longside on any early weakness today, assuming you
get a reversal entry pattern on the intraday chart.
Yesterday’s -2.5% SPX
(
$SPX.X |
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Chart |
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PowerRating) decline, along with -3.2% for the NDX
(
$NDX.X |
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PowerRating) and -2.2%
for the Dow
(
$INDU |
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PowerRating) left us with a short-term oversold vacuum indicated by
such things as the volume ratio, TRIN, etc. NYSE volume was 1.4 billion, a
volume ratio of just 13 — which is extremely one day oversold — and breadth at
-1259. Hopefully, we get early weakness setting up a good reflex intraday pop.
Banks, brokers and
biotechs all got whacked yesterday, while the
(
$SOX.X |
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Chart |
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PowerRating) was a bit softer
at only -1.0%. The
(
QQQ |
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News |
PowerRating)s have a key level from 35-35.50, which is the .50
retracement level, along with some point-and-figure cluster support. The buyers
will move in this time on the QQQs before that level is hit. The .50 retracement
and the .618 retracement at 33.33 are magnets and most likely will be hit after
we have this rally. As I have said before, these rallies are better played with
the index proxies and/or the
(
SMH |
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Chart |
News |
PowerRating)s,
(
SWH |
Quote |
Chart |
News |
PowerRating)s, etc.
Stocks
Today
There are no daily chart
setups of note because of the emotional selling, so I’d stay away from that and
go right to the intraday charts and use primarily, as I mentioned, the QQQs,
SPYs,
(
DIA |
Quote |
Chart |
News |
PowerRating)s, SMHs, SWHs, etc. Selling pressure is considerably different
than emotional pressure and you will get a chance to go contra to this emotional
pressure by scrolling the intraday charts for setups.
On the shortside, if you
get some trade-through entry, you can take a look at
(
MMM |
Quote |
Chart |
News |
PowerRating),
(
MYGN |
Quote |
Chart |
News |
PowerRating),
(
SBC |
Quote |
Chart |
News |
PowerRating) and
(
DCX |
Quote |
Chart |
News |
PowerRating).
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS
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Additional
Below are the tools that Kevin uses on the TradingMarkets
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