Anticipate The Levels And Scroll The Focus List Stocks
What Monday’s Action Tells You
The SPX made a +1.4% reflex to the top of its
7-day range, closing at 1079.34, with an intraday high of 1080.66. The SPY
closed at 108.30, right at the recent resistance of the 7/26 and 8/5
lows/closes. The reflex came on the 34th trading day after the 6/25, 114.94 SPY
high. The Dow was +1.3% to 9955 while the Nasdaq closed at 1783, +1.5%, having
reflexed off its .382 RT level. The QQQ hit an intraday high at 33.18, +1.4%,
but closed at 32.89, +1.1% after trading down to 32.84 from 4 PM to 4:15 PM.
Actually the day’s game was over starting on the 3:20 PM bar but that is not
unusual for a trend up day with no retracements
The primary sectors were led by the basics, with
the CYC +2.7% and XLB +2.8%. The leaders in price and volume were AA, +4%, DOW,
+3%, ROH, +1.9%, PX, +3.9% and PD +3.6%. The XBD was +3.3%, led by MER, +2.7%,
MWD +2.5% and GS, +1.9%, but it was on well below average volume. The retail
sector was up, with the RTH +2.6% led by Home Deport, +2.5% (earnings today) and
LOW, +5.3%. The SMH, after being up +1.8%, fell off to close at +0.6% which is
obviously not good market action, so was flat at day’s end because of no profit
cushion. The intraday high was 29.48, +4.1%, off the .618 retracement level.
NYSE volume was 1.21 billion, with 1.1 billion up and 115 million down, for a
volume ratio of 90. Breadth was +1824, as both were strong all day.
For Active Traders
There was good trade-through entry on the major
indices so it didn’t matter whether you traded the SPY, DIA or the QQQs. I have
included the SPY chart with the continuation entry above 107.35, which traded up
to 108.64, closing at 108.30. The entry on the DIA was above 98.90 and it traded
to 100.03, closing at 99.80. No Trap Door short sales were taken on the early
up, because the up volume/down volume ratio was running 9 or 10 to 1 in favor of
up volume, with breadth tracking above +1600 as the TRIN remained below .45.
If you were following the focus list stocks you caught trades in any of BA, RTN
and LMT, as they were all at retracements to either their 20- or 50-day EMAs.
PCAR, +3.0%, was another good focus list trade that bounced off its 50-day EMA.
It opened and traded up to 58.03 on the first bar, but pulled back to a 57.33
low on the 2nd bar vs, its 50-day EMA at 57.38. It then re-crossed the 50-day
EMA, trading up to a 59.16 intraday high, closing at 59.08. You don’t catch
trades like that unless you have anticipated the levels and scrolled the focus
stocks to catch the intraday setup.
For Today
Yesterday’s reflex, which certainly included some
short covering, took price for the major indices back to the gap-down resistance
of the 8/6 trading day, along with the previous low of 7/26. The closing range
for the SPY was 108.56 -108.28 with closing price at 108.30. That becomes the
downside starting point. The early futures are green at 7:20 AM, but this corner
will not play the same initial continuation entry above yesterday’s high on a
first entry. If they open up and then retrace with the dynamics looking OK, then
long setups can be taken. If price goes South early below those 108.21
-108.27 SPY levels that you see on the chart, then yesterday’s carry-over SPY
trade will be taken off. Also, if for some reason they get a little more lift
today, the SPY 233-day EMA is at 109.11, the 20-day EMA at 109.26 and the
200-day EMA up at 109.76.
Have a good trading day,
Kevin Haggerty
