Avoid Position Entries In Index Proxies Today
What Friday’s Action Tells
You
I had a nice birthday present when I woke up
Dec.
14 and heard the news. This morning that has the emotions running high in
the
futures, with the S&Ps +12, Nasdaq +25 and Dow +115 at 7:10 a.m. ET.
This will
eliminate, because of the gap openings, any and all daily chart setups from
Friday where trade-through entry was above the Friday highs. You can bet
that
the Generals and hedge funds are happy campers with this news, which is an
added
bonus for marking up positions into year-end.
Last week the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) and Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating)
finished at new closing highs, with the SPX +1.2% and Dow +1.6% on the week,
led by the CYC +2.5% for the week, followed by the OIH at +2.6%. Technology,
which has gotten very extended with lots of air pockets underneath, lagged last
week, with the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +0.6%,
(
QQQ |
Quote |
Chart |
News |
PowerRating)s +0.7%, while the semiconductors
and gold were the only sectors to finish negative with the
(
SMH |
Quote |
Chart |
News |
PowerRating) -0.8% and
the XAU -4.1%. As you can see on the table, NYSE volume was average last week
at 1.33 billion, but the up volume (729 million) to down volume (583 million)
ratio improved from the prior week.
| size=2> |
Monday 12/8
|
Tuesday
12/9 |
Wednesday
12/10 |
Thursday
12/11 |
Friday
12/12 |
Net
|
| color=#0000ff>Index | ||||||
| color=#0000ff>SPX | ||||||
| color=#0000ff>High |
1069.59
|
1071.94
|
1063.02
|
1073.63
|
1074.76
|
1074.76
|
| color=#0000ff>Low |
1060.93
|
1059.16
|
1053.41
|
1059.05
|
1067.64
|
1053.41
|
| color=#0000ff>Close |
1069.20
|
1060.18
|
1059.05
|
1071.21
|
1074.14
|
1074.14
|
| color=#0000ff>% |
+0.7
|
-0.9
|
-0.1
|
+1.2
|
+0.3
|
+1.2
|
| color=#0000ff>Range |
8.7
|
12.8
|
9.6
|
14.6
|
7.1
|
20.73
|
| color=#0000ff>% Range |
95
|
8
|
59
|
83
|
91
|
97
|
| color=#0000ff>INDU |
9965
|
9923
|
9922
|
10008
|
10042
|
|
| color=#0000ff>% |
+1.0
|
-0.4
|
-.02
|
+0.9
|
+0.3
|
+1.6
|
| color=#0000ff>Nasdaq |
1949
|
1908
|
1905
|
1942
|
1949
|
|
| color=#0000ff>% |
+0.6
|
-2.1
|
-0.2
|
+2.0
|
+0.3
|
+0.6
|
| color=#0000ff>QQQ |
35.26
|
34.43
|
34.56
|
35.27
|
35.28
|
35.27
|
| color=#0000ff>% |
+0.6
|
-2.3
|
+0.4
|
+2.1
|
-0.1
|
+0.7
|
| color=#0000ff>NYSE | ||||||
| color=#0000ff>T. VOL |
1.19
|
1.42
|
1.41
|
1.44
|
1.18
|
1.33
|
| color=#0000ff>U. VOL |
738
|
410
|
515
|
1.23
|
754
|
729
|
| color=#0000ff>D. VOL |
438
|
999
|
880
|
185
|
414
|
583
|
| color=#0000ff>VR |
63
|
29
|
37
|
87
|
64
|
|
| color=#0000ff>4 MA |
47
|
43
|
40
|
54
|
54
|
|
| color=#0000ff>5 RSI |
64
|
47
|
45
|
85
|
68
|
|
| color=#0000ff>ADV |
2157
|
1285
|
1277
|
2479
|
2142
|
1868
|
| color=#0000ff>DEC |
1088
|
1994
|
2025
|
795
|
1134
|
1407
|
| color=#0000ff>A-D |
+1069
|
-709
|
-748
|
+1684
|
+1008
|
+2304
|
| color=#0000ff>4 MA |
+113
|
-7
|
-185
|
+324
|
+309
|
|
| color=#0000ff>SECTORS | ||||||
| color=#0000ff>SMH |
-0.2
|
-4.2
|
+1.2
|
+2.5
|
-0.1
|
-0.8
|
| color=#0000ff>BKX |
+1.3
|
-1.3
|
-0.3
|
+0.8
|
+0.1
|
+0.6
|
| color=#0000ff>XBD |
+1.1
|
-1.8
|
-1.1
|
+1.7
|
+1.2
|
+1.1
|
| color=#0000ff>RTH |
+0.1
|
-1.1
|
-0.6
|
+1.3
|
-0.6
|
-0.9
|
| color=#0000ff>CYC |
+1.3
|
+0.2
|
-1.1
|
+1.5
|
+0.6
|
+2.5
|
| color=#0000ff>PPH |
+0.9
|
-0.5
|
-0.5
|
+1.4
|
+0.3
|
+1.0
|
| color=#0000ff>OIH |
+0.1
|
-0.3
|
+0.4
|
-0.3
|
+2.7
|
+2.6
|
| color=#0000ff>BBH |
-0.1
|
-0.7
|
-0.4
|
+1.5
|
+0.9
|
+1.2
|
| color=#0000ff>TLT |
-0.7
|
-0.7
|
+0.2
|
+0.7
|
+0.2
|
-0.3
|
| color=#0000ff>XAU |
-0.3
|
-2.9
|
-4.4
|
+2.9
|
+0.6
|
-4.1
|
For Active
Traders
I have included the SMH five-minute chart
from
Friday which shows the small gap opening that traded up to 41.28 on the
second
bar, then reversed the 41.10 lower trading range boundary and traded below
the
50-day EMA of 40.75 to 40.63 and the 60 EMA. If you took the initial short
trade, you had a quick pop, but the SMH then re-crossed the 50-day EMA of
40.75
with the TRIN dropping below .85, so it looked as if price would continue in
the
direction of the up opening. It did, but only to 40.95 before reversing
again
and trading down to the 240 EMA with a 40.47 low (not shown on chart). It
got
choppy after that with a reflex up to 40.91 from the 240 EMA, which you
might
have taken, but after that it was a new intraday low of 40.41 and a
last-hour
rally into the close of 40.91. It wasn’t an easy day to trade the SMHs. The
key
point is that you got activity at the trading range lower boundary in
conjunction with the 50-day EMA, and you were prepared to take setups around
those points.
Today’s
Action
For today, it’s all early emotion, so any
First-Hour trade strategies will be Trap Doors in conjunction with
volatility
bands. If the early futures hold above 11 points, the SPX will start out
close
to today’s 1.5 volatility band, which is 1085.67. The 1.0 volatility band is
1081.83, the 1.28 is 1084, the 2.0 is 1089.51, with the 3.0 band up at
1097.15.
As I finish this, the futures at 8:00 a.m. read as follows: The S&Ps are
+11.10,
Nasdaq +22 and Dow +101, so the volatility bands will come into play early.
If
you play for a quick contra move, keep tight stops and be ready to take
quick
profits. The same obviously applies to any 1,2,3s in the 2.0 -3.0 volatility
band zone.
If you are a relatively new trader and don’t
have
a good handle on intraday dynamics and are uncomfortable with high emotion,
then
don’t get involved because today is obviously not the norm. If you are an
experienced trader, then you are excited about some potential emotional
setups
today. Whatever you do, don’t rush out and take position entries in index
proxies today based on this news event. How it settles and trades going
forward
is the read we will react to, not today.
Have a good trading day,
Kevin Haggerty
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