2.0 VB And Down
It was
another day at the volatility office right off the opening. The
2.0 volatility band for the SPX
(
$SPX.X |
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PowerRating) was 929.81. The SPX hit 927 on
the 9:40 a.m. bar, and that was the intraday high. The opening was ridiculous in
the indices and also in many stocks. After the 2.0 volatility band zone opening,
which some of you faded, there was a textbook 1,2,3 short entry below 922, which
was the Fib retracement bar, and then again below 919.63, which was the 2 point
low and 1,2,3 trend entry. The SPX traded down to an 895 intraday low, which was
also the .618 retracement to Monday’s low of 876.46. You had a 1,2,3 close entry
from there above the 898.42 high of the signal bar. You took entry on the 1:15
p.m. bar.
From there, the index
trended up into the 906 close, or +0.7% on the day. The Dow
(
$INDU |
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PowerRating) was
+0.8%, while the Nasdaq
(
$COMPQ |
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PowerRating) was +1.6%, and the NDX 100
(
$NDX.X |
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Chart |
News |
PowerRating) lost the battle of the dogs at -0.9%. With expiration action
yesterday, NYSE volume expanded to 1.9 billion, a volume ratio of 52, and
breadth +403.
The
(
SMH |
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Chart |
News |
PowerRating)s had the
same pattern as the SPX. They opened at 32, up 5.4% from the previous close of
30.37. What a game. That’s why market makers and specialists love the emotional
openings due to futures and media hype. Those of us that trade the overreactions
are on that team also. The intraday high was 32.42 on the 9:35 a.m. bar vs. the
2.0 volatility band at 32.61, while the 1.5 volatility band was 32.05. The SMHs
then traded down to a 29.80 intraday low before rallying to 31 and closing at
30.58, up a measly 21 cents after all that intraday travel range which was just
great for the daytrader.
Keep your eye on the
resolution of the NDX 100 trading range box I mentioned yesterday and be ready
to play the resolution in either direction. The SMHs had an outside-bar
bottom-of-the-range close yesterday just below the 20-day EMA of 30.71, which
becomes an early pivot. Yesterday’s low was 29.80. The SMHs have rallied 5.4
points, or +20%, in five days from the 27.05 low to yesterday’s 32.42 high. This
was after reversing the 27.31 September low and from the 27.42 2.0 longer-term
volatility band zone. If you didn’t take entry early, you had another chance on
an RST entry above the 29.58 high on the July 11 signal bar. That move was +10%
in four days.
After the 20 EMA pivot
both ways, the SMHs get going above 31.30, which was the first close above the
20-day EMA since May 20. If this is going to be a 1,2,3 daily chart pattern
developing, then you must be aware of the Fib retracements to the 27.05 low,
which are: .50 is 29.73, .618 is 29.10, and .786 is 28.20. If the SMHs get to
those levels, you will look for any intraday setup around the numbers.
The corporate hysteria
slowed some yesterday. Maybe they’re afraid they’ll get more egg on their face
like with Merck. The index proxies and HOLDRs, like the SMHs, are providing
great opportunity, so stay with these, but still scroll for the intraday setups
in the 2-point-or-more average-daily-range stocks. You haven’t had to stray much
past the semis and biotechs.
Have a good trading day.
Five-minute chart of
Wednesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Wednesday’s NYSE TICKS