Don’t Be One Of The Stock Mice!
What Thursday’s Action Tells
You
The 90% of traders/investors that react like
Pavlov’s stock mice because that’s what they have been brainwashed to do by
the
media and many market commentators had the fundamentals and news items
yesterday
which they often use as reasons to actually make trading decisions. There
was
(
WMT |
Quote |
Chart |
News |
PowerRating) and
(
BRCM |
Quote |
Chart |
News |
PowerRating) raising revenue growth numbers and
(
EMC |
Quote |
Chart |
News |
PowerRating)
telling
us good things about tech spending picking up. (By the way wasn’t it CSCO
that
gave us the other side of that story recently and there was a quick air
pocket
day or two down?)
Next on the economic front, there were a
couple
of “positive economic reports,” especially the one I hear maligned
the most by
the media and Democratic politician, that is the manufacturing sector has
been
picking up. Instead of all the rhetoric, why not just look at the actual
chart
and see that manufacturing, which is about no more than 15% of GNP, has been
declining in earnest since 1997 and has been picking up for over two years
now
following the tax cuts, whatever that means in an economy that appears to be
headed to be even more of a service economy. If you can make it for $1.00
and
sell it for $5.00, why make it for $4.00 and sell it for $5.00? There is no
patriotism in the corporate boardrooms when it comes to money.
Because of the unreliability of corporate
earnings reports and analysts reports due to the easily manipulated earnings
under the current accounting rules by corporations and the dismal failure of
fair disclosure, it is pure folly to get involved in the market without a
very
strong technical background.
Many who think they are trading believe the
announced news is reason to act, which is the psychological weakness. It is
highly unusual when a stock or market movement does not precede any positive
development that is actually more than just media news that enable the
futures
to be gamed for a brief interval, just as happened yesterday.
The major indices gapped up on the opening
with
the announced media-hyped news to an 1158.57 high on just the second bar,
which
proved to be the day’s high, then traded down to 1154 and that narrow range
was
intact until the programs hit on the 3:25 p.m. ET bar, and the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) traded right down to an 1147.06 close, probably making many
of
the stock mice unhappy that they bought the hyped news on the
opening.
NYSE volume expanded to 1.52 billion, with
the
programs dropping the volume ratio to 38, and breadth -857. So, does that
mean
it was a bad day? Answer is you don’t know because it was option expiration
activity.
The
(
SMH |
Quote |
Chart |
News |
PowerRating)s were -1.9%, so I guess the Wednesday
(
AMAT |
Quote |
Chart |
News |
PowerRating) news that sent the stock up 5.1% after the close wore off quickly
(you get the point).
| size=2> | Friday
2/13 |
Monday
2/16 |
Tuesday
2/17 |
Wednesday
2/18 |
Thursday
2/19 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High | 1156.88 | H | 1158.98 | 1157.40 | 1158.57 |
| color=#0000ff>Low | 1143.23 | 1145.81 | 1149.42 | 1146.83 | |
| color=#0000ff>Close | 1145.81 | O | 1156.99 | 1151.82 | 1147.06 |
| color=#0000ff>% | -0.6 | +1.0 | -0.5 | -0.4 | |
| color=#0000ff>Range | 13.6 | L | 13.2 | 8.0 | 11.7 |
| color=#0000ff>% Range | 19 | 85 | 30 | 2 | |
| color=#0000ff>INDU | 10628 | I | 10715 | 10672 | 10665 |
| color=#0000ff>% | -0.6 | +0.8 | -0.4 | -.07 | |
| color=#0000ff>Nasdaq | 2054 | D | 2080 | 2076 | 2046 |
| color=#0000ff>% | -1.0 | +1.3 | -0.2 | -1.5 | |
| color=#0000ff>QQQ | 36.98 | A | 37.45 | 37.53 | 36.98 |
| color=#0000ff>% | -0.7 | +1.4 | +0.2 | -1.5 | |
| color=#0000ff>NYSE | Y | ||||
| color=#0000ff>T. VOL | 1.31 | 1.35 | 1.37 | 1.52 | |
| color=#0000ff>U. VOL | 417 | 1.06 | 453 | 557 | |
| color=#0000ff>D. VOL | 866 | 285 | 906 | 919 | |
| color=#0000ff>VR | 32 | 79 | 33 | 38 | |
| color=#0000ff>4 MA | 54 | 65 | 47 | 45 | |
| color=#0000ff>5 RSI | 53 | 66 | 57 | 49 | |
| color=#0000ff>ADV | 1248 | 2425 | 1289 | 1214 | |
| color=#0000ff>DEC | 2033 | 905 | 2003 | 2071 | |
| color=#0000ff>A-D | -785 | +1520 | -714 | -857 | |
| color=#0000ff>4 MA | +268 | +388 | -101 | -209 | |
| color=#0000ff>SECTORS | |||||
| color=#0000ff>SMH | -1.3 | +1.6 | +0.5 | -1.9 | |
| color=#0000ff>BKX | -0.2 | +0.6 | -0.6 | +.06 | |
| color=#0000ff>XBD | -0.5 | +2.3 | -0.2 | -1.3 | |
| color=#0000ff>RTH | -0.9 | +1.1 | -0.1 | +0.4 | |
| color=#0000ff>CYC | -0.9 | +0.9 | -0.6 | +0.1 | |
| color=#0000ff>PPH | -0.4 | +0.4 | -1.7 | +0.4 | |
| color=#0000ff>OIH | -0.6 | +1.1 | -1.8 | -.08 | |
| color=#0000ff>BBH | -1.1 | +0.2 | +0.8 | -0.4 | |
| color=#0000ff>TLT | +0.3 | -.07 | +.07 | +.01 | |
| color=#0000ff>XAU | -0.4 | +3.0 | -4.6 | -0.2 |
^next^
For Active
Traders
If you traded the S&P futures or
(
SPY |
Quote |
Chart |
News |
PowerRating)
yesterday, there were several trade setups. The initial trade was the
opening
reversal after the gap up to 116.39 from 115.66 on the first bar. If you
missed
it, there was a 1,2,3 close entry below 116.24 with actual entry on the
10:00
a.m. bar (our favorite time period). That took the SPY down to 115.84 and
the
240 EMA (on your five-minute chart) which was also a gap pullback setup, and
the
next move from that setup was up to 116.37. Actually, before the program air
pocket on the 3:25 p.m. bar, the SPY traded back down to the 240 EMA again
with
a 115.91 low and then to 116.38 before the air pocket down into the
close.
If you know the different strategies, there were
three first hour ones in play yesterday: opening
reversal, 1,2,3
close, and gap pullback (which was also a .618 retracement to the previous day’s
115.35 low. If you didn’t take at least one of the three, then review the module
or seminar
material because these strategies set up all the time.
The SPY closed with an RST entry close at
115.23
on the five-minute chart. The symmetry count covers both Wednesday and
Thursday,
not the first one you see counting to the left from the drop to the 115.06
low
yesterday and close at 115.23.
Today’s
Action
The futures are not saying anything early,
with
the S&Ps +.50, Dow +12, and the Nasdaq -1. It is a time zone period and
maybe
some more expiration activity today, so unless there is some decent range
movement setting up a contra trade (daytrade), it might be better to read a
book. The reality is that the last five days’ price action in the SPX is
contained within the Feb. 11 range of 1158.89 – 1142.33, or just 1.4%.
Certainly
not very exciting. In fact, the last 25 days, the SPX has traded within a
2.9%
range, in spite of all the daily noise. You are trading for less, but the
daily
noise still provides opportunity, especially in individual stocks as there
has
been significant rotation even though the major indices remain locked in
their
current range.
Don’t be one of the stock mice, get strong
technically.
Have a good weekend and have a good trading
day,
Kevin Haggerty
P.S. You can finally learn
what traders have been asking me to teach them for years—