As Easy As 1,2,3
NYSE
volume was just below average at
1.3 billion, as the major indices started resolving the divergence from a
short-term overbought condition. The Dow
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It was an excellent
trading day with the major indices by utilizing well-defined 1,2,3 entries.
Using the Dow as an example, there was a 1,2,3 long entry above 8640 on the 9:55
a.m. bar, and it ran to 8745 by 11:25 a.m. without any stop out. The 1,2,3 short
entry was below 8716 on the 12:00 p.m. bar. This move carried down to the
intraday low of 8473 thanks to Greenspan, then closing at 8482.39. These entries
are from the five-minute charts.
The Dow churned around
the 8600 level from 2:30 to 3:30, then broke to the 8473 intraday low as the
Program Gang took over. If you were just using your five-minute charts, you
probably, or should have, taken this continuation short trade below 8600. Those
of you from my seminars using the 820 Trend Identification Method also caught
the symmetry of the 1,2,3 short entry below 8600 on the 60-minute chart as it
broke below the 8 and 20 EMAs. If you didn’t catch that, then reread the manual
and/or view the tapes.Â
In the sectors, the
retail was strong for the first half of the day, with the RLX running at +3.0%
during this time frame. The
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of course, held any gains, as the RLX ended -0.4% and the SOX -4.2% as the major
indices came back as the SOX declined further. That divergence going into the
last couple of sessions was not going to hold up, and the odds were higher that
the indices would come back from the short-term overbought condition rather than
the semis advance. I won’t even comment on just another Greenspan short-term Dr.
Jekyll and Mr. Hyde. Maybe the Queen of England made him a knight of doubletalk.
The only thing you can hang your hat on these days are the technicals and the
inevitable overreactions due to all the surrounding noise the markets are
subject to.
If we head south today,
look for intraday shorts in biotechs which declined -5.6% yesterday from the
mentioned overbought condition. And you also might catch a downdraft in some of
the banks which are running into profit-taking at the 50-day EMA, along with the
brokers. These are intraday trades only. Also, frame the indices and HOLDRs on
the 60-minute chart for levels in confluence with daily chart levels. On the
daily charts, any continuation entries for the indices to the upside are
obvious, and every Edwards and McGee disciple will be with you, so do your work,
and you will get entry long before that if we sell off into September and
October.Â
Have a good trading day.
Five-minute chart of
Tuesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Tuesday’s NYSE TICKS