Game Day
The
Dow finished +0.9%, which is +75 points, but
it had the funny money rally in the last hour of +100 points. It is at its
50-day EMA and is approaching the 8900 – 9000 resistance wall. If the market was
in a gradual uptrend from the opening yesterday throughout the day and closed
+75 points, it has different meaning regarding the Generals. When you analyze
the daily market action, you must try and distinguish between the games and real
buying. That’s not easy to do all the time.
If you look at my S&P
500 and Nasdaq screens every day, they will tell you if and where the Generals
were that day. You should also watch that up/down volume ratio all day while you
trade, which will help you see whether the Generals have constant buy orders
around the floor, or whether it’s just a sudden futures-induced move. When you
get days with a good volume ratio and breadth, the program acceleration of the
real institutional buying is what produces the moonshot.
Without question, the
weakest part of all the traders I have had at my seminars is their
interpretation of the daily market dynamics and relating it to trade selection
and managing their trade according to how strong or weak the dynamics are. They
are excellent at learning the patterns, but I must tell you it’s the dynamics
that make the pattern, not the pattern itself. That is why trading really is an
art, and not a science.
NYSE volume was a repeat
of the previous day at 1.5 billion shares, a volume ratio of 73, and breadth
+780, which is about half of the previous day. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) was
+1.2%, the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +0.8%, and the NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) +1.3%.
The SPX hit a high of 933.29 yesterday, closing at 930.25. The 930 – 950 zone is
resistance, with the 50-day EMA at 935 and point-and-figure trendline and the
head-and-shoulders neck between 940 – 950. The 20% gain level from the key
inflection point zone and 776 low is 931.
This move has been a
homerun for those of us that played. The 20% run has been in just 17 days, so do
you really think the probability is in your favor buying the SPX right here
because it fits a trend pattern? It can certainly go higher into this resistance
zone over the next few days, but the odds favor a downside air pocket next week.
The type of stuff you
must avoid is, for example, Pfizer
(
PFE |
Quote |
Chart |
News |
PowerRating) that is now getting the bullish
hype just as it trades into its 200-day EMA of just over 34. It closed yesterday
at 33.59. All of a sudden the analysts love it, but didn’t like it 17 days ago
at 25.16. The more things change the more they stay the same. The stock is up
35% low to high and trading into its 200-day EMA. No thank you. But it does go
on my list of stocks to watch at the different Fib retracement levels going
forward. If you can’t buy it right, don’t buy it.
I hope most of you caught
the second-entry move on the SPX yesterday above the previous day’s high of
920.21. It carried up to 932.43 before you got a narrow-range reversal bar,
which was also the 1.618 Fib extension of the previous leg down. See your
60-minute chart for clarity. The Fib extension level was also into the beginning
of the 930 – 950 resistance. Think sequence when you manage your trades.
Have a good trading day
and enjoy the option expiration. If it doesn’t happen early for me, I’m out of
here.
Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Thursday’s NYSE TICKS