’21’
The
SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) declined 2.3% yesterday
on a wide-range bar that closed in the
bottom of the range, reversed the previous three closes, and closed below the
previous two lows. It closed at 902.65, just below its 89-day EMA of 903.38.
Yesterday was the 21st day of this rally, if you count the low day, or else
today is. Either way you count is okay because it is just the possible reversals
you look for around the numbers.
It just so happens that
in spite of all the surrounding noise with war talk, earnings season, and the
political nonsense preceding the mid-term elections, the fact is that the major
indices are trading by the numbers. The decline from the March 19 high was 89
days, the July 24 to Aug. 22 rally high was 21 days, then the decline to the
Oct. 10 low was 34 days, and now we are 21 days into this rally, and the .786
retracement level to 965 is 923, so you should not be surprised or caught naked
long into a strong awareness zone. There are some other confirming longer-term
numbers that hit Nov. 7 and 8 on the nose, but I am not going to explain them in
this daily commentary.
Wednesday’s SPX high was
925.66, with the high close of this rally the same day at 923.76, right on the
.786 level. NYSE volume yesterday was just over average at 1.45 billion, a
volume ratio of 19, and breadth -978. It is common for retracements from strong
up moves to start on normal or light volume. I don’t know whether you get the
4.0% to 5.0% cushion move up through the 945 – 950 level before the SPX retraced
at least .38 or not. But this market must, in my opinion, go lower before it
goes higher. +20% in 21 days for the SPX is very thin ice and can’t be
sustained without a good retracement.
In previous commentary, I
mentioned the BKX, which was -3.7% yesterday, and the XBD, -3.6%, were both
bumping against their 200-day EMAs, so there is no edge from those levels,
including the major indices, even if there is to be an extended 4.0% to 5.0%
move through the 950 zone before a retracement.
With Republicans in,
there will be some very positive things happening that will give a lift to this
market, in spite of the Democrats fighting them all the way. They might hold up
a few, or even stop some, but most will pass. That positive focus will be
coupled with the fear of the Iraq developments now that it appears that the
government has some room to muscle the guy rising up from the East, so says our
friend Nostradamus.
During the coming
retracement, we will get some good two-way action intraday by shorting
retracements and playing any quick downside moves that get to the 1.5 – 2.0
volatility bands or other significant inflection point levels that you should be
aware of. For position traders, keep your powder dry, i.e., the SMHs don’t get
interesting to me again until the 23.41 – 21 zone, which would be enough
retracement from the +57% move to bring some catch-up money into the leaders of
this current rally. Maybe the CSCO negative hype will give us another
opportunity like the +48% move that INTC has made that started just one day
after the media- and analyst-induced panic. Hello?
Have a good trading day
and have a great weekend.
Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Thursday’s NYSE TICKS