Framing These Levels Will Help You Spot Divergences
size=”2″>Friday
was the second retracement daysize=”2″>
from the resistance zone for the major indices and
(
SMH |
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Chart |
News |
PowerRating)s. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) lost 1.4%, Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) 1.6%, NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) 2.2%,
and
the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was -1.3%. NYSE volume was 1.3 billion, a volume
ratio of 23 which follows the previous day’s 32, and breadth was -745. The
SPX
closed at 898.81 and below the first volatility band, as it traded sideways
from
11:30 a.m. to 4:00 p.m. ET between 902 and 898. (See Friday’s
commentary.)
There were
trade-through
intraday entries for the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s and
(
SPY |
Quote |
Chart |
News |
PowerRating)s, as they traded below
their
60-minute 20-period EMAs. But the SMHs, which lost -4.9%, closing at 25.88,
opened down on a wide-range bar and closed below the previous five closes
and
four lows. Keeping it in perspective, the SMHs had gained +19.3% low-to-high
in
just seven days from 23.28 to 27.78. The up move, as usual, followed a
negative
INTC/semi report by a particular brokerage firm I won’t mention, but I’m
sure
you can remember the commentary several weeks ago where I said bad is good
for
the semis most of the time as it gives us good entry on the overreactions.
Both the SMHs and
QQQs
had traded up to their upper band of the three-month regression channel, so
that’s also a reason why I said they had gotten extended. Friday was the
second
day down, so we must prepare for the next move/upside reversal. On a
continuation basis of this current rally, it would be a re-crossing of the
200-day EMAs to the upside for the SPX, Dow and SMH. The QQQs are still
trading
above their 200-day EMA, which is about 26.50, and that is also about the
20-day
EMA level.
I am doing this
Sunday
night on my laptop for Monday, so I am just eyeballing the moving averages,
but
they are close enough for government work. The 50-day EMA for the QQQs is
around
26, with the 89-day at 25.75. The SMH 200-day EMA is 26.35, with the 20-day
EMA
at about 25.40 and the 50-day at 24.50.
Framing the primary
major
index, which is the SPX, we should use the 919.74 high to the 862.72 swing
point
low on April 10, where this last leg up started. The SPX closed at 898.81
vs.
the .382 retracement to 862.76 of 898, which is also the minor support
mentioned
in Friday’s commentary. The .50 retracement is 891.25, .618 — 885, .786 —
875.
I mention these Fib levels because they also tie in with the SPX daily EMAs
which should come into play if the Generals are going to take this market
back
above the 200-day EMAs. The SPX 20-day EMA is about 886, the 200-day SMA is
at
879, and 200-day EMA up at 905. 884 comes into play as the .50 retracement
to
the 1987 low. The framework is the background to watch the price action at
these
levels and look for intraday setups that, if sufficiently profitable at
day’s
end, might be carried over.
The SPX had a +16.6%
run
from the 788.90 March 12 low to last Wednesday’s 919.74 intraday high in
just 29
days, with higher highs and lows all the way. I would expect the major
indices
to make an upside reflex attempt from at/or above any of the previously
mentioned moving averages/Fib levels. You can frame the Dow, QQQ and SMH Fib
levels, which will enable you to spot any divergences. We have already had a
776, 769 and 789 SPX bottom, so any breaking below the EMAs by the major
indices
would not be a positive technical development.
Have a good trading
day.
src=”https://tradingmarkets.com/media/2001/Haggerty/kh042803-01.gif”
width=”383″ height=”282″>
Five-minute
chart of
Friday’s SPX with 8-,
60- and 260-period
EMAs
src=”https://tradingmarkets.com/media/2001/Haggerty/kh042803-02.gif”
width=”383″ height=”326″>
Five-minute
chart of
Friday’s NYSE TICKS