Don’t Give Back Yesterday’s Gift
What Thursday’s Action Tells You
As expected, the July magnet highs got taken out
yesterday, with the Generals doing a good job marking up their technology
winners, along with some of their larger big-cap winners and their top holdings.
You were ready for this and hopefully didn’t fade yesterday’s up move (see the
Aug. 28 commentary). The Nasdaq
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the Dow
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PowerRating) was +0.6%, closing at 1002.84. The July high is 1015.41, the
high close at 1011.66 on June 17, preceding the first decline back down to the
long-term head-and-shoulder neckline at the 960 level, which in fact, it did
again on Aug. 6. NYSE volume was again light at 1.07 billion, but in pre-holiday
low liquidity, prices can be marked up/down on well less than their average
volume, which especially helps when it is also at month’s end and rising prices.
We won’t dwell on the market’s month-end action pre-holiday because it’s not
unexpected and tells us very little.
For Active Traders
It was an excellent day for traders yesterday, as
we got the early morning overreaction to the economic report, accelerated by the
futures attack on the 10:00 a.m. ET bar ending on the 10:15 a.m. bar, as the S&P
E-minis (ESU) went from 998.25 to a 990.25 low on the 10:15 a.m. bar, which then
traded up to 993 and the “game” was over and the trend up day started. You
seminar veterans had a field day, as you got 1,2,3 higher bottoms in the ESU,
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big-cap stocks with the same 1,2,3 higher bottom.
Not only did you get a clearly defined 1,2,3
higher bottom entry, but the trading gods almost pushed you into the trade, as
for example, your entry in the ESU3 was above 993.25 at worst, and this was a
re-cross of the 992.10 20-day EMA coming from the 990.25 intraday low. The SPY
did the same from an intraday 99.66 low, re-crossing the 99.76 20-day EMA,
trading up to 101, closing at 100.76. The ESU3s ran 10 points to 1004.
Because we were focused on the July magnet highs,
I have included the Dow 30 five-minute chart which shows you the 1,2,3 higher
bottom entry, which was at worst case, above 9286. Your vehicle could have been
either the futures or DIAs. The Dow then re-crossed the 9301.50 20-day EMA,
trading up to 9342.35 before pulling back to the 240 EMA setting up a flag
continuation pattern with entry above 9334. This move took out the 9353 July
high, trading up to a 9392.52 intraday high and closing at 9374.21. You also
have the monthly chart today which tells you the Dow is back up to the initial
trendline resistance level at about 9600. The Dow had previously traded to a
9536 intraday high on Aug. 22, but closed down at 9348.87 that day on a sharp
reaction from the trendline, but had also entered a key retracement zone. The
.50 retracement to the 11,750 all-time high is 9473, with the .618 retracement
at 10,011. The higher trendline is up at about 10,800.
Both the Nasdaq and Dow have entered the fifth
leg off the March lows and the SPX is close, but has yet to do the same. This
fifth leg, so far, is full of negative divergence, but that story is for
Tuesday’s commentary.
Today’s Action
For today, it’s probably best to shut down and
take the extra day. If you have the DTs and must hang around, be careful, as the
institutions are reluctant to get too aggressive on any upside mark-up on the
last trading day of the month, but often will leave some buy orders in their key
stocks so nothing bad happens barring any overt news. Don’t give back today your
gift from the trading gods and Generals that you got yesterday.
Have a great weekend and have a great holiday,
Kevin Haggerty
