Bigger Picture, Here’s Where The SPX Is
What Monday’s Action Tells You
To this point, the SPX
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down cycle is just a pause of -2.3% vs. the last one ending with the Aug. 6
960.84 low, which was only a -5.4% decline from 1015.41. The major indices have
gone quiet the last three days after the decline to the 20-day EMAs on declining
NYSE volume of 1.5 billion on the first day to the SPX 20-day EMA level, then
1.3 billion, 1.2 billion, and NYSE volume of just 1.1 billion yesterday. The
range for the SPX was just 6.2 points on this fifth day down from the 1032.41
rally high. The five-day retracement follows a 23-day up move from the Aug. 6
960.84 low, so nothing unusual about it at this point. The SPX was -0.4%
yesterday, with both the Dow
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ratio was 35 and breadth -321 on NYSE volume of 1.1 billion shares.
There was no enlightenment from yesterday’s
sector action, as the
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volume of just 7.3 million vs. 10.8 million on Friday, which had followed the
21-million-share day when the SMH re-crossed and closed above its 20-day EMA,
which is now 36.22. Looking at the major index screens, there was no real common
industry thread yesterday which encompassed both price and volume. From the 3
Day Wake Up Call screen, you see a
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indices with rising price on increased volume for the last three days, so it is
a live candidate for a breakout of its recent trading range to new highs. I only
point it out to highlight the daily process of using the screens to identify
potential trading opportunities and market indications.
For Active Traders
It wasn’t a daytrader’s kind of action yesterday
in the major indices, as the SPX went sideways from 12:00 p.m. ET to 4:00 p.m.
after making a 1013.59 intraday low. There was better opportunity in some of the
semiconductors because of the early 1,2,3 lower top setup in the SMHs. One
example of this would be the 1,2,3 lower top for
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below 56.60, then trading down to a 55.38 intraday low, closing at 55.50, with
the 20-day EMA at 56.17. Net net, the travel range for the major indices creates
the daytrader’s opportunities.
Today’s Action
We start today with basically the same daily
chart setups for the major indices as it was on Monday, all around the 20-day
EMA zone, which is again in play both ways, and you can be sure that the past
four days’ range will be resolved ASAP. On the upside, you can play off the 1015
upper end of that three-month trading range.
Until the market proves otherwise, it remains in
the fifth leg on the daily chart of the rally starting in March. The five-day
retracement hasn’t altered that pattern yet. Looking at the longer-term chart,
the SPX is in leg three of the current move from the 769 October low, which
means that the highest probability is that there will be a fourth leg down and
then a fifth leg up of some degree. (Both daily and weekly chart examples will
be included in tomorrow’s commentary.)
Have a good trading day,
Kevin Haggerty
