Here’s Why The QQQs Are At A Key Point
Yesterday was the sixth day in succession
where both the open and close for the SPX
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Consolidation usually follows thrust as volatility narrows, but the ensuing move
from the consolidation in either direction is very tradable. If they break this
current consolidation to the upside, it will certainly put pressure on the 954 –
965 zone of resistance. 933 – 935 is the top of the seven-day consolidation
which is right at the 936.13 .786 retracement level. The high-close magnet of
this rally to 954.28 is 940.41.
FYI: I use the SPX as an
example most of the time because that is the major index. Most key big-cap OTC
stocks are included in this index. It is also where the programs that move the
market take place. The futures and
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SPX cash index. All of the patterns I talk about can be seen on the futures and
SPYs, just as they are on the SPX. In fact, you should be trading the futures
off the SPX cash index. So, please, no more e-mails on why I do this. I write in
English, which is our native tongue, so it is the same thing.
NYSE volume declined for
the fifth day in a row to 1.35 billion, while the SPY volume was the lightest
volume of the year. The SPX had a narrow-range day, which I consider less than
10 points, with a close in the top of the range, and a volume ratio positive at
68, which is the best of the past three days. On the day, the SPX and Dow
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There was a good Trap
Door setup for the SPY/futures followed by a 1,2,3 higher bottom, with entry
above the signal bar high of 92.75 on the SPYs. The trade carried to 93.30 by
10:45 a.m. ET, then it was a sideways pattern until 3:00 p.m. where we then got
an option expiration program move. For example, the Dow closed up 57 points on
the day, and that’s exactly what it gained in the last hour of trading. The Trap
Door setups were similar for the
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breakout beyond the 936.13 – 941 level runs into the 200-day EMA at 950, which
guards the 954 – 965 zone. This also includes the larger head-and-shoulder
neckline.
The QQQs are right at a
key point, closing at 27.11 in an inside-bar pattern. The 40-week EMA is about
27.36, the 200-day EMA is 27.52. The Monday reversal-bar low is 26.73. The
risk/reward is good regardless of which direction the QQQs take because your
stop is so close to entry. It starts with a daytrade entry not necessarily above
27.52 or below 26.73. A good intraday entry can give you an edge before the
obvious entry.
This is option expiration
week, and there is usually a big day in either direction. The tight
consolidation for the major indices for the past seven days is a layup for the
program traders because they can force the action coming out of the top or
bottom of this consolidation knowing it will force traders, etc., to take
action. This is also a strong time zone through Jan. 18., but because the 18th
is a Saturday and Monday is a holiday, it carries over to Tuesday the 21st.
Because of the consolidation into this period, the edge is not obvious, but the
coiled spring will unwind.
Regarding your e-mails on
the VIX, I will watch for a move above 27.83, the high of a double-inside-bar
pattern, but most significant going into today is above the last three-bar
reversal swing point high of 28.78 on Jan. 8. Those are my triggers depicting a
change in direction, but I must also see a reversal pattern for a major index.
The low side is 26.19, and any upside breakout will send the VIX below that
level and the setup process starts all over again.
Have a good trading day.
Five-minute chart of
Tuesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Tuesday’s NYSE TICKS