Betting On The Generals
What Monday’s Action Tells
You
The emotion lasted one bar on the gap-up
opening,
then it was trend down into the close of 1068 on the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating).
You’re
certainly familiar with that retracement level. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating)
had a
significant reversal from a 1949 close on Friday to 1980, or +31 points, on
the
9:30 a.m. ET bar, then reversed 62 points down to a 1918 close, or -1.6% on
the
day. This maintains the negative momentum you saw on the chart in the Dec.
11
commentary. Neither the Nasdaq nor
(
QQQ |
Quote |
Chart |
News |
PowerRating) made a new rally high in
conjunction with the SPX and Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating), and in fact, the QQQs have
failed the last two times to make a new high.
NYSE volume expanded to 1.46 billion, with the
volume ratio at 46, and breadth -740. The
(
SMH |
Quote |
Chart |
News |
PowerRating)s again led the downside,
closing at 39.63 on a wide-range bar and the second most volume since the October
2002 lows. The SMHs gapped open to 41.85, +2.3%, from the previous 40.98 close
on the lowest opening volume I have seen in quite a while. It traded to an intraday
41.89 high between the 1.28 volatility band at 41.83 and the 1.5 volatility
band at 41.99, then it was trend down into the close.
| size=2> |
Tuesday
12/9 |
Wednesday
12/10 |
Thursday
12/11 |
Friday
12/12 |
Monday
12/15 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
1071.94
|
1063.02
|
1073.63
|
1074.76
|
1082.79
|
| color=#0000ff>Low |
1059.16
|
1053.41
|
1059.05
|
1067.64
|
1068
|
| color=#0000ff>Close |
1060.18
|
1059.05
|
1071.21
|
1074.14
|
1068.04
|
| color=#0000ff>% |
-0.9
|
-0.1
|
+1.2
|
+0.3
|
-0.6
|
| color=#0000ff>Range |
12.8
|
9.6
|
14.6
|
7.1
|
14.8
|
| color=#0000ff>% Range |
8
|
59
|
83
|
91
|
0
|
| color=#0000ff>INDU |
9923
|
9922
|
10008
|
10042
|
10023
|
| color=#0000ff>% |
-0.4
|
-.02
|
+0.9
|
+0.3
|
-0.2
|
| color=#0000ff>Nasdaq |
1908
|
1905
|
1942
|
1949
|
1918
|
| color=#0000ff>% |
-2.1
|
-0.2
|
+2.0
|
+0.3
|
-1.6
|
| color=#0000ff>QQQ |
34.43
|
34.56
|
35.27
|
35.28
|
34.74
|
| color=#0000ff>% |
-2.3
|
+0.4
|
+2.1
|
-0.1
|
-1.4
|
| color=#0000ff>NYSE | |||||
| color=#0000ff>T. VOL |
1.42
|
1.41
|
1.44
|
1.18
|
1.46
|
| color=#0000ff>U. VOL |
410
|
515
|
1.23
|
754
|
516
|
| color=#0000ff>D. VOL |
999
|
880
|
185
|
414
|
928
|
| color=#0000ff>VR |
29
|
37
|
87
|
64
|
36
|
| color=#0000ff>4 MA |
43
|
40
|
54
|
54
|
56
|
| color=#0000ff>5 RSI |
47
|
45
|
85
|
68
|
56
|
| color=#0000ff>ADV |
1285
|
1277
|
2479
|
2142
|
1278
|
| color=#0000ff>DEC |
1994
|
2025
|
795
|
1134
|
2018
|
| color=#0000ff>A-D |
-709
|
-748
|
+1684
|
+1008
|
-740
|
| color=#0000ff>4 MA |
-7
|
-185
|
+324
|
+309
|
+301
|
| color=#0000ff>SECTORS | |||||
| color=#0000ff>SMH |
-4.2
|
+1.2
|
+2.5
|
-0.1
|
-3.1
|
| color=#0000ff>BKX |
-1.3
|
-0.3
|
+0.8
|
+0.1
|
-0.6
|
| color=#0000ff>XBD |
-1.8
|
-1.1
|
+1.7
|
+1.2
|
-1.1
|
| color=#0000ff>RTH |
-1.1
|
-0.6
|
+1.3
|
-0.6
|
-1.8
|
| color=#0000ff>CYC |
+0.2
|
-1.1
|
+1.5
|
+0.6
|
-0.6
|
| color=#0000ff>PPH |
-0.5
|
-0.5
|
+1.4
|
+0.3
|
-0.7
|
| color=#0000ff>OIH |
-0.3
|
+0.4
|
-0.3
|
+2.7
|
-1.8
|
| color=#0000ff>BBH |
-0.7
|
-0.4
|
+1.5
|
+0.9
|
+0.1
|
| color=#0000ff>TLT |
-0.7
|
+0.2
|
+0.7
|
+0.2
|
-0.6
|
| color=#0000ff>XAU |
-2.9
|
-4.4
|
+2.9
|
+0.6
|
+1.1
|
For Active Traders
The best volatility band trade from a recognition
standpoint was the
(
DIA |
Quote |
Chart |
News |
PowerRating)s which opened at 101.78, just below the 2.0 volatility
band of 101.97. This trade was just about fading price as it re-crossed the
1.5 volatility band of 101.63 to the downside. It traded down to 101.12, which
was the 50% gap pullback level, then went sideways until a downside breakout
on the 2:50 p.m. bar. If you covered on the gap pullback, there was a Slim Jim
between 101.40 – 101.12 until about 1:00 p.m., then another between 101.20 –
101 from 1:15 p.m. to 2:50 p.m. That breakout carried down to a 100.39 intraday
low, closing at 100.50. This corner covered and then went long at the gap pullback,
then scratched the long trade due to getting timed out. The market action was
not good when after the gap pullback it drew a sideways line, and the Generals
did not take them up from there. I missed the first Slim Jim, but caught the
second one on the 2:50 p.m. bar. Used the futures.
I have included the DIA five-minute chart
showing
the initial part of the trade in the morning. You also have the S&P
E-mini chart
which shows the early futures mark-up and reversal after the SPX hit an
intraday
high of 1082.71 vs. its 1083.92 1.28 volatility band. I included both charts
to
point out the difference in the extended levels so you can see why the DIAs
were
selected.
Today’s
Action
This is a big option expiration week which
can
add to the volatility and provide some excellent trading opportunities. The
first focus today will be on the SMH and/or related individual semiconductor
stocks. Yesterday, the SMH reversed 5.4% from the 41.89 intraday high on the
first bar to 39.63, which gets it back to that 38.50 – 39.10 zone which gave
us
that quick reflex up. The 89-day EMA is 38.76. There are two separate 1.618
Fib
extension at 38.78 and 38.87, in addition to one of my proprietary indicator
levels also at 38.76. This is key price alert zone to anticipate a reversal
trade using the five-minute timeframe for the intraday setup. After
yesterday’s
intraday reversal, a quick pop can come from above 39 as well.
The DIAs closed yesterday at 100.45 after an
intraday high of 101.78. This is a major price zone for the DIA/Dow. The
.618
retracement to the 117.50 all-time high from the October 2002 72.03 low is
100.13, and there is also a 1.618 Fib extension of the retracement leg down
to
the March 74.31 low at 100.76. If this zone is taken out, the next level
that
price can extend to is the 104.18 .707 retracement, then 107.77, the .786
level.
If the major indices turn red today, the DIAs will be the short index
selection
because it is extended in a key price zone due primarily to the major
advance of
the cyclicals.
The
(
SPY |
Quote |
Chart |
News |
PowerRating) closed at 107.60 and is +1.7%
above
its 10-week EMA of 105.82. The 10-week EMA has been the extent of the
retracements for the SPY since June, so any quick air pocket to that zone
will
be an opportunity.
The Nasdaq Composite has ranged out for the
past
eight weeks between 2000 – 1874, closing yesterday at 1918. This is the
1.618
Fib extension zone of 1955 from the March retracement leg to 1253.22. The
Composite has a significant MACD negative divergence on the daily chart (see
12/11 commentary), but so far it is being worked off in a sideways trading
range
of less than 7.0%. The 10-week EMA is 1916. In trading range setups,
when
you take a long trade at the low end of the range and it fails, then breaks
the
range to the downside, you are able to reverse your trade and both entries
are
at a low common denominator, which is the best risk/reward.
Some more downside from yesterday would be
best
for short-term traders because of the levels, and then bet on the Generals
into
year-end.
Have a good trading day,
Kevin Haggerty
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