After Three Straight Up Days, Here’s What I’m Doing
The Generals look like
they plan to make May a positive month also which ends this Friday.
The Dow closed at 8480 on April 30 and yesterday closed at 8781. The initial
retracement was from 8743 to 8417, and then we caught the recross of the 200-day
EMA above 8494 on 5/21 and it has been up for three straight days since the
recross.
There were new rally high closes for the major
indices yesterday as NYSE volume was 1.5 billion, volume ratio very strong at
84, and breadth +1279. The SPX
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was + 2.1%, Nasdaq
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which had declined 9.2% to 26.26 from the 28.92 high on May 12 — which happened
to be right at the 2.0 standard deviation band — closed at 28.55 yesterday,
+5.2%, making up most of that loss. We were on the case there at the
200-day EMA at 26.50, so it was another good recross of a pivot, even before
yesterday’s move.
The BBH shot up 4.5% on over 100% of the average
volume. In fact, six of the top ten NDX stocks in volume on today’s index screen
are Biotechs. The BBHs
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that the SMHs had a +42% volume increase yesterday, but that wasn’t reflected in
most of the individual stocks with the exception of Micron Technology
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which was +9.7% on more than 100% of its average volume. Intel
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gained 5.2%, but only on an 18% volume increase.
Money managers and hedge funds preferred to grab
the SMHs in this environment to avoid the individual company risk. The major
indices are back up to the high end of resistance, which extends up through 965.
The SPX 951.48 close is pushing the 954.28 December 2 intraday high. The .236
retracement to the 1553 all-time high is 954. The six-month +2.0 standard
deviation level is now about 965 for the SPX. The retracement from the 942 +2.0
level on May 14 was from the 948 level to 912, a decline of only of 3.8%. The
QQQs +2.0 level was 29 on May 14, and only declined 5.4% to 27.41. The QQQ
closed at 28.55, with the current 2.0 level now at 30, and the 3.0 band at
31.50.
From the e-mails, I was happy to see that many of
you played the Trap Door on the SPX, which never hesitated in price until it got
to 95, consolidated, then traded finally to a 95.80 intraday high, closing at
95.41. The Diamonds
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up to 88.17. Feels good to take the correct trade, then get lucky on price,
doesn’t it? The QQQ gave you an Opening Reversal on just the second bar as the
technology stocks showed the earlier strength. The Q’s opened at 27.92,
with the low on that first bar of just 27.90 and the high of just 27.98. Entry
was on the second 5-minute bar above 27.98, running to a 29.22 intraday high and
closing at 29.20. The best setup, however, was the SMH, as it took off on the
second bar like the QQQs, but the solid entry was above 27.05, which broke it
out above the previous day’s closing range of 27.05-26.90 and above all of its
8, 20, 60 and 240 EMAs on the 5-minute charts. It ran +4.4% from entry level.
My observation yesterday with the big increase in
the BBH and SMH volume along with some specific above-the-line stocks that are
on the scrolling list is that the Generals pushed hard on their winners coming
into month end and the SPY just trading at its average volume was confirmation
to my way of looking at market dynamics. For today, I wouldn’t touch any first
time breakout above the previous day’s high after three straight up-days,
including yesterday’s wide-range bar for the SPX, and many other things
obviously, too, including all the stocks. If there is no pullback,
setup, or second entries, then I will play golf.Â
Have a good trading day.
Kevin Haggerty
PS
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