Contracted Volatility Precedes Travel Range
What Monday’s Action Tells
You
The market game was called off yesterday due
to
no players. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) daily range was all of 3.3 points, so
that
obviously took all of the futures/index proxy traders out of the game. The
SPX
gained less than a point, while the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was -5 points. The
Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was +0.3% to 2093 with the
(
QQQQ |
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Chart |
News |
PowerRating) +0.5% to 37.87. The
sectors were nondescript, except the
(
OIH |
Quote |
Chart |
News |
PowerRating), -1.3% and definitely in need
of
some retracement. There is a negative divergence in a momentum oscillator,
and
the OIH closed at 93.20. The 10-day EMA is 91.36, 20-day EMA 89.67 and
yesterday’s high was 1.21x the 200-day EMA and the ratio where the OIH has
retraced from several times before.
NYSE volume fell off to 1.29 billion shares,
but
the internals remained neutral/plus with the volume ratio 55 and breadth
+363.
The 15-period CMO (Chande Momentum Oscillator) for the SPX is above 50, but
hasn’t hooked down yet, so maybe the SPX can make a run and take out the
1217.90
high into Feb. 16, 17, 18. That would set up a few things, in addition to
some
scale-up selling to start reducing some longer-term equity exposure as this
bull
cycle gets long on time (28 months).
Sectors with better relative performance that
could precede the SPX to new rally highs are the XLB (basic materials),
29.81
close/30 high, XBD (brokers), 152.11/152.78, and the XLF (financials),
30.52/30.78.
The XLE and XLU are, of course, the leaders
and
have already been making new rally highs. Retail has lagged, with the RTH in
a
99.80 – 95.36 trading range since 12/01/04. The previous rally high is
102.07.
With the
(
SPY |
Quote |
Chart |
News |
PowerRating) in essentially a 121 – 120.50 narrow range since 11:30
a.m.
ET on Friday, it is safe to assume this contracted volatility pattern will
be
resolved soon and then daytraders can turn the lights on again.
Have a good trading day,
Kevin Haggerty