How To Get A Better Feel For The Market Than Most Traders
What Wednesday’s Action Tells You
The first bar high on the SPX
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992.50 was it for the day, and also the intraday high, as the index traded right
back to the starting point of Tuesday’s “game” after the Fed announcement. The
more things change, the more they stay the same. The SPX hit 982.60 on the 11:55
a.m. ET bar, made a .618 retracement to the 992.50 high at 988.72 by 2:40 p.m.,
then sold off to a 980.85 intraday low on the 3:35 p.m. bar, closing at 984.03,
-0.6% on the day. The Dow
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the first bar at 9322, which just happened to be at the June 17 9323 rally high
close. These “just happens” keep on repeating, and the reason why you should be
aware of the various key inflection points and levels. The Dow closed at 9272,
-0.4%, while the
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essentially flat at 1687, with the 20-day EMA at 1688.85, which becomes part of
today’s game both ways. NYSE volume was just under 1.2 billion for another
relatively light day. The volume ratio at 44 was just below the mid-point, and
breadth was -348.
In the sectors, the
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lighthouse, closing the day +1.9% at 32.20 on big volume, while all of the other
major sectors finished red, with the exception of gold, as the XAU was +1.3%.
The long bond proxy
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are babbling about inflation instead of the deflation chatter just a few weeks
back despite the bull move in commodities since February of 2000. The beat goes
on.
This current SMH move was preceded by Monday’s
+2.0% close and +46% increase in volume on the re-cross and close above the
50-day EMA, which is why it was once again on our primary focus list Tuesday
(see the 8/12 commentary). The SMH had declined 9.1% in six days to the 50-day
EMA of 30.49. Volume very often precedes price when there is an agenda and/or
the Generals are active. I look for this constantly in individual stocks, groups
and sectors using my screens which are posted daily at the bottom of my
commentary.
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leading semi at +5.3% on 127% more than its average volume and the fourth
highest percentage gainer in the SPX.
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+3.6% and
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as the semi equipment stocks moved together, which is what you like to see.
For Active Traders
Active traders familiar with 1,2,3s had a short
opportunity after the SPX failed to penetrate the initial 994 level of the
confluence outlined in yesterday’s commentary, then again on the .618
retracement to 988.71. Some of you that thought the futures-induced move Tuesday
afternoon would prevail, might have played long from the dynamite triangle breakout
above 984.27 around 12:45 p.m., which was also where shorts should have covered
some or all of their 1,2,3 trade.
The SMH has offered the best long opportunities,
as it was trend up after the initial four-bar pullback to 31.58, then a reversal
of the 31.82 opening-bar high. If you are using my intraday dynamics sheet, you
saw the SMH’s positive divergence, especially at 11:00 a.m. when the SPX was -6
points, the Dow -55, TRIN 1.42, QQQs -0.4%, yet the SMH was +1.0%. All of the
other major sectors were red at the time, except the retail
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just +0.2%. The SMHs never looked back in the +1.9% day.
By keying on those intraday dynamics, you had to
play the long breakout of the SMH flag above about 32.07 around 12:20 to 12:30
p.m. If you work with the dynamics sheet every day, you will have a better feel
for the market than most all other traders.
Today’s Action
Being that the SPX closed back to go at 984,
yesterday’s confluence just above remains the same, starting with the 989.27
monthly pivot and the 20-day EMA now 983.50 just below, with the 50-day EMA at
977.20. The semis remain the focus, especially after yesterday’s big volume
increase following up the Monday surge in volume and price. The high close in
the entire SMH rally is 32.85, so maybe we will get those late-to-the-party
breakout buyers to show up before the move ends.
Of the major indices, if a breakout move to new
highs is pushed, it will probably come from the Dow, as the high close is 9323
vs. yesterday’s 9271.76 close. That puts the
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also some key higher-priced stocks in the Dow, like
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price-weighted index and very easy to “game” by the hedge funds if the tape is
right at the time.
Have a good trading day,
Kevin Haggerty
