Go Figure
The
scorecard yesterday after the mystical afternoon reversal on Monday was
the Dow
(
$INDU |
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PowerRating) -1.9%, S&P 500
(
$SPX.X |
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divergence in the Nasdaq
(
$COMPQ |
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$NDX.X |
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about 40% above average, a volume ratio of 33, and breadth -627. I am sure there
was some option expiration activity involved also, as the expiration is this
Friday. The Nasdaq breadth was better at just -20, and a volume ratio of 40 on
volume of 2.3 billion shares, which is about 30% above average.Â
There was opportunity
early, and then again around 3:00 p.m. The early morning decline from Monday’s
magic reversal took the DJX down to the .618 retracement to Monday’s 82.45 low
and then rallied about 2 points to 86.17. We went sideways from 11:00 a.m. to
3:00 p.m. before a 1,2,3 entry finally resolved itself that took the DJX down a
point to close at 84.73. The SPX had the same sequence, except that the first
move down was a .50 retracement to Monday’s 3.0 volatility band low of 876.46.
The index closed at 901.
The biotechs
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$BTK.X |
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-2.2%, but it was the afternoon decline that turned it red, but not before some
excellent opportunities in many of the various stocks in the group, including
the
(
SMH |
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PowerRating)s, which closed at 30.37, right in the .618 retracement zone to
Monday’s low, and just above its 260 EMA of 30.12 on your five-minute chart.
The NDX is in a 17-day
trading box from 1066 – 946. This 13% range will get resolved soon. The index
closed at 1011.30. The 20-day EMA is 1031 and the 50-day EMA is up at 1118. You
don’t want to know how far up the 200-day EMA is, but a 37% rally would reach
it.
The SPX had a four-day
sequence with three down days then one up, which was last Thursday, and is now
repeating that sequence. We have just seen the three days down, but with an
inside day close yesterday, not a new low. A change-in-direction bar can happen
without trading above Monday’s high of 921.40. Seeing that the SPX closed at 901
and yesterday’s high was 919, it means we must look for intraday early entry if
the early green holds up.
The media’s focus will
now swing more to earnings season and maybe a little less hysteria on the
corporate accounting. Needless to say, it is an extraordinarily nervous tape
both ways, and the more intense the negative, the less it takes to turn it
around, this time not only for the shorts, but many money managers afraid to
miss any sustained rally that can make up a few basis points against their
current losing year. They know any rally will be quick and most of it taken away
from them because of gapped openings, so they must act early.
As for Haggo, I think any
upside reflex will be tough to sustain, and I still believe that the major
indices will trade lower into the fall. August is historically the second worst
month of the year, followed by September, which is the worst. Maybe we will have
an inversion this time based on the recent decline approaching these months, but
if we do, there are many itchy trigger fingers ready to exit any rally early and
to sell more of their dogs into any strength.Â
Have a good trading day.
Five-minute chart of yesterday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of yesterday’s NYSE TICKS