How To Read The Language Of The Market
What Friday’s Action Tells You
Friday’s market action resulted in an opening move
to a marginal SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) new high at 1062.39, and then a move back
down into that 60-minute chart trading range where price has spent most of its
time since Oct. 29. (See Nov.
7 commentary.) The SPX hit 1061.44 on last Monday and 1062.29 on Friday,
but closed the week at 1053.21, up just 0.3%, or 2.5 points on the week, in
spite of all the positive media hype on GDP, etc., most of which was anticipated
and well advertised in advance.
The churning last week is right at the 1060 .382
retracement zone to 1553 from the bear market low of 769, in addition to the
daily chart negative divergence in momentum. There is certainly other confluence
just above 1060. (See Nov.
4 commentary.) In fact, you should keep for reference the Nov. 4 and Nov.
7 commentaries which frame most of these levels. Friday’s commentary shows the
near-term retracement levels to 1018.32 and the Fib extensions above 1061.44
if they push price some more.
| size=2> | size=2>Monday
11/3 |
size=2>Tuesday |
size=2>Wednesday
11/5 |
Thursday
11/6 |
Friday
11/7 |
Net
|
| color=#0000ff>Index | ||||||
| color=#0000ff>SPX | ||||||
| color=#0000ff>High | 1061.44 | 1059.02 | 1054.54 | 1058.94 | 1062.39 | 1062.39 |
| color=#0000ff>Low | 1051.84 | 1051.70 | 1044.88 | 1046.93 | 1052.17 | 1044.88 |
| color=#0000ff>Close | 1059.02 | 1053.25 | 1051.81 | 1058.05 | 1053.21 | 1053.21 |
| color=#0000ff>% | +0.8 | -0.5 | -0.1 | +0.6 | -0.5 | +0.3 |
| color=#0000ff>Range | 9.6 | 7.3 | 9.7 | 12 | 10.2 | 9.7 |
| color=#0000ff>% Range | 78 | 21 | 71 | 93 | 10 | 47 |
| color=#0000ff>INDU | 9858 | 9839 | 9821 | 9857 | 9810 | |
| color=#0000ff>% | +0.6 | -0.2 | -0.2 | +0.4 | -0.5 | +0.1 |
| color=#0000ff>NASDAQ | 1968 | 1958 | 1959 | 1976 | 1971 | |
| color=#0000ff>% | +1.8 | -0.5 | +0.7 | +0.9 | -0.3 | +2.6 |
| color=#0000ff>QQQ | 35.77 | 35.55 | 35.83 | 35.95 | 35.64 | |
| color=#0000ff>% | +1.7 | -0.6 | +0.9 | +0.3 | -0.8 | +1.4 |
| color=#0000ff>NYSE | ||||||
| color=#0000ff>T. VOL | 1.36 | 1.34 | 1.36 | 1.42 | 1.41 | 1.38 |
| color=#0000ff>U. VOL | 1.02 | 485 | 679 | 908 | 693 | 757 |
| color=#0000ff>D. VOL | 318 | 836 | 657 | 494 | 689 | 599 |
| color=#0000ff>VR | 76 | 37 | 51 | 65 | 50 | |
| color=#0000ff>4 MA | 62 | 54 | 54 | 57 | 51 | |
| color=#0000ff>5 RSI | 78 | 62 | 59 | 69 | 56 | |
| color=#0000ff>ADV | 2270 | 1677 | 1637 | 1893 | 1769 | 1849 |
| color=#0000ff>DEC | 984 | 1591 | 1590 | 1348 | 1475 | 1398 |
| color=#0000ff>A-D | +1286 | +86 | +47 | +545 | +294 | +2258 |
| color=#0000ff>4 MA | +614 | +440 | +448 | +491 | +243 | |
| color=#0000ff>SECTORS | ||||||
| color=#0000ff>SMH | +3.8 | 0 | +1.8 | +0.5 | -0.3 | +5.8 |
| color=#0000ff>BKX | +1.0 | -0.2 | -.02 | +0.6 | -0.8 | +0.4 |
| color=#0000ff>XBD | +1.5 | -0.7 | -0.7 | +0.5 | +0.9 | +1.4 |
| color=#0000ff>RTH | +1.2 | -0.8 | -0.8 | +1.0 | -0.9 | -0.3 |
| color=#0000ff>CYC | +1.0 | +0.2 | -0.4 | +0.7 | -0.3 | +1.2 |
| color=#0000ff>PPH | -0.1 | -1.3 | +0.2 | +0.6 | -0.7 | -1.3 |
| color=#0000ff>OIH | -2.0 | +0.4 | +0.9 | +0.1 | +0.4 | -0.2 |
| color=#0000ff>BBH | -1.0 | -0.5 | +0.5 | +1.1 | -0.8 | -0.7 |
| color=#0000ff>TLT | -0.5 | +0.6 | -0.7 | -1.0 | -0.06 | -2.2 |
| color=#0000ff>XAU | -2.1 | +0.8 | +.02 | -1.9 | +2.6 | -0.6 |
Looking at this week’s market table in relation
to the previous week’s table, you can clearly see the drop off in momentum relative
to rising price in the major indices. Last Thursday, the four-day moving average
of the “Advances Minus Declines” topped out at +803, as did the four-day moving
average of the “Volume Ratio” at 64. The “Breadth” moving average declined into
Monday, as the SPX price advanced to the 1060 .382 retracement zone for the
first time, hitting 1061.44. This ratio continued to decline into Friday’s +243
number, while price made another run on news hype to 1062.39, but closed at
1053.21 and below the midpoint of the week’s daily range. (See “Percentage Range”
of 47 in “Net” column.)
The “Volume Ratio” moving average
held at 62 into
last Monday, but declined to 51 on Friday, certainly not oversold, so there
is
obviously no short-term buy edge right here. The ratio of “Up
Volume” to “Down
Volume” was 1.6:1 the week ending Oct. 31, but dropped to 1.3 last
week. The
“Five-Day RSI” declined to 56, with the SPX making a marginal new
high of
1062.39 on Friday from the five-day RSI of 78 on Monday when the index hit
1061.44.
Looking at the major sectors, it was all
semis
again last week, with the
(
SMH |
Quote |
Chart |
News |
PowerRating) +5.8% net for the week, on top of a
+7.8%
net gain the previous week and into the confluence zone of four numbers.
(See
the Nov. 7 commentary.) The other strong sectors during this recent move
have
been the XBD, +1.4% last week, but +6.4% for the past two weeks. The CYC is
+6.1% for the two-week period. There was a divergence last week in the
retail
sector, as the RTH was -0.3% net for the week after a +3.3% gain the
previous
week.
Because the SMH, XBD and CYC are so extended
on a
longer-term standard deviation basis, there are in the red alert zone and
must
be watched closely for early warning which might precede a worthwhile
retracement in the major indices. In addition to the CYC, you should be
watching
the copper futures which are also extremely extended and can be an early
warning
in a reversal of the cyclicals.
For Active
Traders
Friday’s trading action in the major indices
was
mostly chop, unless you played the Trap Door reversal of the Monday SPX
1061.44
high. Even if you did, it was a hard trade to manage because you had to play
the
retracement long setup at the 20-period EMA that moved back in the direction
of
the open. There was a 3:30 p.m. ET flash down move of about 5 SPX points,
but
all in all, not a very well defined trading day.
For Today
I am doing this Sunday for Monday, Nov. 10,
and I
wish all of you ex-Marines Happy Birthday and Semper Fi. I generally get
lost
sometimes on this day, but I don’t think any of you but the Far Left will
mind,
and frankly ———————–.
The major indices and semis start the week in
a
zone of confluence, in addition to still being in a time period, so price
action
is key after seeing the divergences last week in the table’s statistics.
Price
has entered a potential reversal zone, but we don’t know whether it goes
sideways in a trading range and up, or else reverses and down. The 1050 –
1100
SPX zone will have some issues with price, and more so because of the
divergences you see in momentum. If it reverses down more than 5.0%, it will
produce a good short-term buying opportunity. Don’t get caught trying to
overlay
a bear market on this market that has price above all of its rising moving
averages.
Aggressive traders can play the very
short-term
moves both ways, but general market participants are, and should have, been
long
for quite a long time, and should remain so because the market hasn’t hinted
in
any significant way that it is changing direction. If you have protected
your
significant gains with cheap index puts vs. your index proxy long positions,
then by the way I think, you have “done good” as they say because
if the indices
take off on a +20% run through the new year, and you only gain 15%, do you
really care? But if it is a -20% terrorist-induced crash, and you only lose
5.0%
– 6.0% from that level, I would expect you to be feeling pretty good about
yourself and your money, as you should.
Have a good trading day,
Kevin Haggerty
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