Day traders favor reversal strategies
The SPX gave back half of Wednesday’s
gains, closing at 1245.60 minus 0.5% as did the Dow to 11019.Â
The QQQQ was minus 1.3% and Nasdaq composite down 0.9%. The only green sector was
energy with the OIH plus 0.6% and XLE plus 0.4% while the semiconductors led the
downside with the SMH down 1.3%. NYSE volume was the lowest of the week at
1.46 billion shares, with the volume ratio 33 and breadth minus 943. The
major index rallies are being lead by shrinking universal stocks, which is
evident by the 4-day moving average of breadth, which has been negative for
fourteen straight days. It is also evident with the new highs versus new
lows numbers. Yesterday’s market action reflected the high inflation/low
growth news hype. Interest rates rose with the TLT minus 0.6% as the US
dollar advanced versus the Euro. The TLT is minus 0.9% so far this week,
on top of last week’s minus 1.7%.
Daytraders capitalized on the first hour reversal strategies
in the energy stocks yesterday. They opened strong following big gains the
previous day, and then made a contra move down, setting up the RST reversal
strategy for the XLE, OIH and many of the component stocks. These RST
trades were very successful as the energy stocks resumed the direction of the up
opening (90%-60% rule) and traders went to the bank. The commodity sectors
continue to be the primary source of profit for traders, and I expect that to
continue. There are 6 trading days left for the 6 month report card, and
the generals will try to close June with the SPX positive for the 6 month time
frame (>1248.29) if they can. If there is any more weakness in the next
few days in the SPX, it will find buyers into month end.
Have a good trading day,
Kevin