From Here Through Year-End, This Is Your Trading Plan
What Tuesday’s Action Tells
You
It was a good day for traders yesterday with
some
initial setups, then trend up without whipsaws. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) made
back what it lost the previous day, closing at 1075.13, +0.7%. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) made another new high close at 10,130, +1.1%. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) and
(
QQQ |
Quote |
Chart |
News |
PowerRating)s continued to lag and were both +0.3%.
Actually,
the Dow at +1.1% beat all of the major sectors as the multi-nationals
continue
to do well with the Dollar weakness and the economic growth reports giving
the
cyclicals legs. The market action yesterday was also evidenced by some
option
expiration activity which will influence the price noise for the next few
days.
NYSE volume expanded to 1.51 billion, with some
program activity, the mix of which you can’t know, but checking your table today,
you see that the short-term cycle is rolling to the upside again. The volume
ratio yesterday was 62 and the four-day MA also 62. Advances minus declines
was +588, which is light relative to the volume ratio of 62, and this indicates
a concentration of volume in fewer stocks which are the big-cap program stocks,
as opposed to a broad public participating advance. With expiration this week
and year-end adjustments, there will continue to be erratic moves which daytraders
must be ready to play because it might just be a one trend move during the day.
| size=2> |
Wednesday
12/10 |
Thursday
12/11 |
Friday
12/12 |
Monday
12/15 |
Tuesday
12/16 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
1063.02
|
1073.63
|
1074.76
|
1082.79
|
1075.94
|
| color=#0000ff>Low |
1053.41
|
1059.05
|
1067.64
|
1068
|
1068.04
|
| color=#0000ff>Close |
1059.05
|
1071.21
|
1074.14
|
1068.04
|
1075.13
|
| color=#0000ff>% |
-0.1
|
+1.2
|
+0.3
|
-0.6
|
+0.7
|
| color=#0000ff>Range |
9.6
|
14.6
|
7.1
|
14.8
|
7.9
|
| color=#0000ff>% Range |
59
|
83
|
91
|
0
|
90
|
| color=#0000ff>INDU |
9922
|
10008
|
10042
|
10023
|
10130
|
| color=#0000ff>% |
-.02
|
+0.9
|
+0.3
|
-0.2
|
+1.1
|
| color=#0000ff>Nasdaq |
1905
|
1942
|
1949
|
1918
|
1924
|
| color=#0000ff>% |
-0.2
|
+2.0
|
+0.3
|
-1.6
|
+0.3
|
| color=#0000ff>QQQ |
34.56
|
35.27
|
35.28
|
34.74
|
34.87
|
| color=#0000ff>% |
+0.4
|
+2.1
|
-0.1
|
-1.4
|
+0.3
|
| color=#0000ff>NYSE | |||||
| color=#0000ff>T. VOL |
1.41
|
1.44
|
1.18
|
1.46
|
1.51
|
| color=#0000ff>U. VOL |
515
|
1.23
|
754
|
516
|
925
|
| color=#0000ff>D. VOL |
880
|
185
|
414
|
928
|
557
|
| color=#0000ff>VR |
37
|
87
|
64
|
36
|
62
|
| color=#0000ff>4 MA |
40
|
54
|
54
|
56
|
62
|
| color=#0000ff>5 RSI |
45
|
85
|
68
|
56
|
64
|
| color=#0000ff>ADV |
1277
|
2479
|
2142
|
1278
|
1947
|
| color=#0000ff>DEC |
2025
|
795
|
1134
|
2018
|
1359
|
| color=#0000ff>A-D |
-748
|
+1684
|
+1008
|
-740
|
+588
|
| color=#0000ff>4 MA |
-185
|
+324
|
+309
|
+301
|
+635
|
| color=#0000ff>SECTORS | |||||
| color=#0000ff>SMH |
+1.2
|
+2.5
|
-0.1
|
-3.1
|
-0.6
|
| color=#0000ff>BKX |
-0.3
|
+0.8
|
+0.1
|
-0.6
|
+1.0
|
| color=#0000ff>XBD |
-1.1
|
+1.7
|
+1.2
|
-1.1
|
+1.0
|
| color=#0000ff>RTH |
-0.6
|
+1.3
|
-0.6
|
-1.8
|
+0.2
|
| color=#0000ff>CYC |
-1.1
|
+1.5
|
+0.6
|
-0.6
|
+0.6
|
| color=#0000ff>PPH |
-0.5
|
+1.4
|
+0.3
|
-0.7
|
+0.5
|
| color=#0000ff>OIH |
+0.4
|
-0.3
|
+2.7
|
-1.8
|
+0.8
|
| color=#0000ff>BBH |
-0.4
|
+1.5
|
+0.9
|
+0.1
|
+0.5
|
| color=#0000ff>TLT |
+0.2
|
+0.7
|
+0.2
|
-0.6
|
+0.5
|
| color=#0000ff>XAU |
-4.4
|
+2.9
|
+0.6
|
+1.1
|
-2.9
|
For Active Traders
The only major sector red yesterday was the semis,
with the
(
SMH |
Quote |
Chart |
News |
PowerRating)s -0.6%, but they provided +3.0% of trading opportunity from
a 1,2,3
double bottom entry to an intraday high of 39.77, then closing at 39.33. I have
included yesterday’s five-minute SMH chart which shows the initial Trap
Door trade after the SMH hit 39.09 where there was a reflex the other day
and is the top of that 38.50 – 39.10 zone you were prepared for in advance by
previous commentary. Entry was above 39.25, the narrow-range signal bar high
after the five-bar pullback on narrowing range and increasing volume. This trade
failed at 39.61 with a three-bar reversal below the three-bar Dynamite Triangle
(two inside bars within the wide-range bar). Depending on how you managed the
trade, your worst case was a breakeven scratch trade, but most of you that have
attended my seminar or have the modules, you probably took some money off the
table on part of your position before scratching the balance.
The next long setup was the 1,2,3 double bottom
pattern with entry above 38.57 (three-bar reversal, but you could have also
entered above the 38.42 signal bar high, but there was no real price difference).
The 1,2,3 double bottom entry was confirmed by the 8,3,3 slow stochastic reversing
above 20 and coming off a positive divergence. From there, it was about trade
management, as the SMH traded to 39.50 by 3:00 p.m. ET, then pulled back a few
bars to 39.15 and made another rush to 39.77 on the 3:40 p.m. bar (not shown
on chart). No short continuation trade was taken below 39.09 by this corner
because of the confluence in this 38.50 – 39.10 zone and the five-minute trend
means nothing relative to that. (See yesterday’s commentary.) The SMH closed
at 39.33 on a re-cross of the 89-day EMA, which is 38.76, and the last two days
have been on a significant volume increase. The SMHs have declined -14% from
the 45 – 44 confluence zone.
The other chart is the S&P E-mini future
which
shows you the 1,2,3 higher bottom with a three-bar reversal entry above 1068
and
then the continuation range breakout to new intraday highs. This pattern was
also confirmed by the 8,3,3 stochastic. From here through year-end, you are
just
reacting to the different price noise and trading what is.
TRIVIA FACT: “In a
survey in
March 2001, 95% of American economists thought there would not be a
recession,
yet one had already started.”
(Source: The Economic Cycle
Research
Institute.)
The major indices didn’t make that mistake,
but
many momentum traders did that only know one kind of market.
Have a good trading day,
Kevin Haggerty
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