Frame Your Levels And Watch The Major Sectors
The 20-day EMA downside pivot for the SPX got
taken out on the first bar yesterday. The SPY opened at 99.45, had a first bar
high of 99.49, then traded below the 20-day EMA of 99.32, and then was trend
down to an intraday low of 97.86 on the 3:15 PM 5-minute bar. There was a reflex
up to 98.41, closing at 98.24. The SPX intraday low was 975.63. There was a
confluence of five numbers between 977 to 972, with the 50-day EMA at 971.60
going out last night. The numbers include a weekly S1 pivot, a .50 retracement
to 1177, a .382 retracement to 1316, and a .786 retracement to 962.10 from
1015.41. The levels constitute our awareness zone where you watch price for any
intraday reversal setups which are simply retracements in a larger uptrend.
NYSE volume was light at 1.2 billion, with
declining prices following an up option expiration Friday, which happens often.
The volume ratio was 21, which follows an 81 day preceded by a 20 volume ratio
day — a bit erratic, to say the least, but you were prepared for that going
into last week. On the day, the SPX was -1.5%, the Dow was -1.0%, and the Nasdaq
-1.6%, closing at 1681.43, and just below the 1687 breakout level. The QQQs
closed at 30.83, -1.4%.
In the major sectors, the SMH declined
2.1%,closing at 30.83 and trading for the second day at an intraday low of
30.60. Double 30.60 lows is the daytrader’s pivots today both ways The
volume in the index proxies was erratic as the QQQs traded 105 million shares on
+29% more than its average volume, while the SPY traded -15% and the SMH 22%
less than its average volume.
The common thread from the S&P 500 screen
yesterday, which is on my commentary page on the Tradingmarkets site every day,
was that some more money was chasing some chemicals like APD and EMN, and other
industrial stocks such as Ingersoll Rand
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PowerRating), Praxair
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PowerRating), and Minnesota
Mining
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PowerRating). Intel lost 2.4% on a 65% increase in volume and has given back
all but 2.9% of the 8.1% gain since the hype started last Monday.
If you took the downside pivot short trade below
the 20-day EMA in the SPX using wither the SPY or the E-mini, then you had a
great day because there certainly wasn’t much of a bounce from the trend-down
day action, so long traders didn’t fare as well.
If there is any carryover weakness today, there
could be some good intraday setups in the QQQs that closed at 30.83 with the
50-day EMA at 30.25. Also, the SPY, with the 50-day EMA at 97.88 versus a 98.28
close. The SMH closed at 30.80 versus the double 30.60 lows with the 20-day EMA
at 30.64 and the 50-day EMA just below at 29.34 which is a magnet the SMH will
probably hit soon.
The Dow closed within the symmetrical triangle
again at 9097, having hit an intraday low of 9075. The 20-day EMA is 9103 with
the 50-day EMA at 8955, which will probably get hit on a breakout of the
triangle below 9040. On the upside, watch the Nasdaq Composite 1687 and 1692
20-day EMA levels as potential pivots if the game is green today.
Net net, the SPX is in the lower end of its
trading range since early June, with a confluence of numbers from 977 and 972,
so any good intraday setups can be taken at these levels because the lower
boundary is obvious. Some other major sectors to watch right at pivot levels are
the BKX which closed at 885.31 versus its 20-day EMA 883; the XBD, which closed
at 551.60 versus its 20-day EMA of 548.65, and the RTH which closed at 82.55,
just below its 20-day EMA of 82.71.
The major sectors can also give you an early read
on the next directional move of the major indices. From a position standpoint on
the long side, my next interest is at lower levels on a continued move down into
at least August and hitting some extended downside volatility bands.
Anything outside of that is just the daily game reactions.
Have a good trading day,
Kevin Haggerty
