Here’s The Profit Side Of This Current Equation…
The
volume ratio was yesterday’s market summary.
NYSE volume was 1.27 billion with 1.2
billion down, for a volume ratio of just 5, and breadth a whopping -1795. The
major indices all declined about 3.5% or more, as did many of the sectors, such
as the BKX and XBD, both off 3.5%. The
(
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PowerRating)s were -5.3%.
There were no option
expiration programs or bond-to-stock swaps to help accelerate any of that
premature victory emotion prior to this past weekend. (See the
March 19 commentary.) I can see that US civilians have no concept of what’s
involved over there, and that perception is not being helped by the constant
misinformation by the media as they try to scoop each other, which only results
in confusion as they have to retract or change many of their initial stories.
The potential for negative news near-term certainly far outweighs the positive,
and if you think otherwise, good luck on your mission.
The TRIN yesterday went
to 4.0 just before 11:00 a.m. ET and never looked back, finishing the day at
5.0, so there were not any real reversal opportunities until there was a 76
point upside reversal in the Dow
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$INDU |
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PowerRating) starting just before 2:30 p.m. at
8185, which carried up to 8261 before fading to close at 8215. The SPX
(
$SPX.X |
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News |
PowerRating) reversed from the same zone as our trade on March 20. See the
March 21 commentary for the chart outlining that trade.
Yesterday there was an
862 low before the SPX reversed to 869.38 from a Kings & Queens reversal
pattern, just as it did on the 20th. This move failed and closed down at 864.23.
861.45 is the .50 retracement between 954 to 769, rounded off; 863 is the .618
retracement to the 1994 low. Yesterday’s 3.0 volatility band was 859, and also
last Thursday’s low. The 2.0 volatility band was 871, and price churned between
871 and 866 from 10:30 a.m. until 1:30 p.m. when the SPX then traded down to the
next level setting up a trade. I call it scratching for pennies yesterday, not
trading for dollars.
As you know, the decline
yesterday was again very beneficial as the short delta increased enabling
another profitable adjustment.
For today, if the early
green futures hold, the SPX revisits the 870 head-and-shoulder neckline, which
quickly becomes resistance again after yesterday’s decline to 862. A second time
through that 870 level might be a good long trade, but for sure, it then becomes
your downside pivot. This is why key levels are important because there is
usually a good move away from these levels, and short-term traders can play it
either way.
For you money managers
that read this rag every morning, buying weakness and selling strength remains
the profit side of this current equation. Buying on news is not what it’s about.
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS