Hitting The Wall
The S&P 500 cash hit the resistance wall at 1351 and then reversed course after 2:00 PM ET to close at the bottom of its range at 1335.90 on a definitive outside reversal day. The techs gave back some of their strong gains of the past five days.
Between the large percentage moves in the techs and the 78% retracememt area at the 1350-1355, it’s not surprising the market hit the wall on relatively light volume of 708 million. Watch for a head fake today if you’re planning to play the short side with the QQQs (the NASDAQ 100 spiders) below yesterday’s low of 110. The second move below 110 will be a higher probability trade. A likely scenario, with the S&P futures off 3-4 points around 8:30 AM, has the QQQs opening below 110, trading back above 110, then breaking back below that level again for good entry.
Some of the techs that broke out of six- to eight-week bases have pulled back to the tops of (or inside) of these ranges. Watch for opportunities. The stocks that pull back to breakout levels but don’t penetrate their bases are usually stronger plays. Let the dynamics dictate which ones to trade if they set up.
Target Stocks Of The Day  Not many of the high relative strength volume stocks set up, but there are a few stocks that have been relatively quiet that look like they’re getting ready to go: Medtronic [MDT>MDT], Dollar General [DG>DG], and Home Depot [HD>HD]. Staples [SPLS>SPLS], which we’ve talked about, is still in its base and still looks good, and Costco [COST>COST] is another name basing down around its 50- and 200-day EMAs (this one’s probably not a stock to trade today).
Also watch Biogen [BGEN>BGEN], Novell [NOVL>NOVL], if it comes out of its cup-and-handle, Boise Cascade [BCC>BCC], American International Group [AIG>AIG], AT&T [T>T], and Yahoo [YHOO>YHOO], which made a good run yesterday.
Program Trading Numbers |
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Buy | Sell | Fair Value |
15.00 | 10.30 | 12.70 |
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.