From Outhouse To Penthouse
From
being down on the day, the
major indices and most all sectors went from the outhouse to the penthouse
starting on the 1:35 p.m. bar, as the program lights lit up across the NYSE
floor. The major indices skyrocketed with the SPX
(
$SPX.X |
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Chart |
News |
PowerRating) +4.0%, the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) +3.1%, and the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +5.1%, with the NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) at +6.7%. The SOX
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) gained 7.8% after a -4.2% loss
the previous day and -7.0% the previous three days. The RLX
(
$RLX.X |
Quote |
Chart |
News |
PowerRating) was
+6.1%, and even the dogs like telecoms, Internets and networking all had gains
of 5.0% or more. NYSE volume was
just above average at 1.5 billion, with breadth at +1424, and a volume ratio of
85.
I thought it was very
interesting that after Greenspan’s negative flip-flop the previous day on his
changed economic outlook that Treasury Secretary O’Neill came out guns blazing
this morning with a 3.0% – 3.5% GNP growth outlook and saying no inflation. Of
course, this followed Bush’s economic grab ass session.Â
There is an option
expiration this Friday, and the last five or six expirations all had bizarre
false rally days before expiration. You then have maybe the shorts being
squeezed in a premeditated play by a major mutual fund or two, or maybe CNBC’s
new buzzword of asset allocation going from bonds to stocks by some pension
funds played a part. It could have also been an unwind of a macroplay, which
would be long bonds and short stock, by some major hedge funds, which often have
a tendency to be playing the same game, and sometimes in concert. It was not the
Generals all starting the day with a bullish outlook and committing funds, then
all at once saying, “Buy them at the market held.” That’s not the way
they work.
Regardless of the reason,
major index price is now in continuation with the new higher close of 919.62 for
the SPX, which is just below the 935 – 950 resistance, which includes the 50-day
EMA. The Dow closed in the top of the range on an outside bar at 8743.31, which
is just above its three-day moving average of the high. There is significant
resistance from 8800 – 9000. The Nasdaq closed at 1334.30, just below the 1350
resistance, with the 50-day EMA not far above at just below 1400. The major
indices are all sitting in pretty ascending triangles for all to see, so we’ll
see if the pros can make a play here and draw a crowd on a breakout.
After yesterday’s race to
glory, I wouldn’t play any early initial breakout today on the indices unless
you are a scalper with very tight stops. The second entry would be a better
play, as it is most of the time. You would, of course, take all 1,2,3 short
setups in the major indices.
To see how bizarre the
spike was, check today’s S&P 500 screen and sort it by Percentage Price,
then look at the corresponding Volume Percentage. The biggest increase in volume
all came in the dogs, so certainly the shorts were involved covering yesterday.
It’s for this reason, along with the erratic volatility and news hysteria that I
still prefer the index proxies and HOLDRs as my trading vehicles of choice. The
stocks are selected only from intraday scrolling of patterns setting up long or
short. You should still favor wide-range stocks like semis and biotechs, along
with other stocks like IBM, WLP and UNH that are emerging from ranges.Â
Have a good trading day.
Five-minute chart of
Wednesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Wednesday’s NYSE TICKS