Identify The Stock And Trade It
What Tuesday’s Action Tells
You
The market action was over after the first
hour
and the major indices performed poorly into the close, giving up much of the
early gains. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) closed at 1168.41, +0.4%, after hitting
an
intraday high of 1174.30. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was +0.9% to 10,462, the
Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) 2020, +0.6%, and
(
QQQQ |
Quote |
Chart |
News |
PowerRating) +0.5% to 36.71.
I thought the internals were much weaker than
the
price gains in the major indices. Breadth was just +66 and the volume ratio
neutral at 55. NYSE volume expanded to 1.61 billion shares.
The QQQQs, which hit their 36.50 .50
retracement
to the August 32.35 low on Monday, were the most oversold on my short-term
composite, starting yesterday’s trading at -149. This was in contrast to the
SPX
at -75. Things won’t happen until the QQQQs can re-cross the 200-day and
40-week
EMAs at 36.80 and 36.85.
The SPX 5 RSI went out at 35, hooking up for
a
positive divergence to the 1163.75 low, so it is in position for a reflex
back
to the 50- and 20-day EMA levels of 1180 – 1183.68. If that 1163 – 1161 zone
gets taken out, the 200-day EMA around 1140 is in easy reach.
The major indices didn’t provide much trading
travel range yesterday due to the gap-up opening followed by the sideways
price
action. However, there were opportunities in individual focus stocks. The
Dow
Transportation Average was +2.2%, and focus stock
(
CSX |
Quote |
Chart |
News |
PowerRating) gave you a +
3.9%
move from entry to high on a First Consolidation Breakout to new Intraday
Highs
and a re-cross of the 50-day EMA. If you scrolled your list, you found the
setup. Also,
(
RIG |
Quote |
Chart |
News |
PowerRating) ran +1.7% after a specific strategy setup. Both are
“Above the Line” stocks on the
Inner Circle focus list.
The primary sectors were led by the
(
SMH |
Quote |
Chart |
News |
PowerRating),
+1.8%, and was certainly overdue for a green day. However, the SMH
was -121.4 on
my composite and not quite as oversold as the QQQQ because it has been
hanging
in the 31 – 29 price zone for the past 10 days, while the QQQQ has had a
mini-knife down the previous four days.
(
MER |
Quote |
Chart |
News |
PowerRating) led the brokers yesterday at +2.1%,
while the XBD was +0.7% and others like
(
LEH |
Quote |
Chart |
News |
PowerRating) maintained good chart
patterns
relative to the major indices. That clearly puts them on your number one
list
each day until things change. The early futures are green, so if they fade,
the
bias is to taking long setups on any kind of weakness.
Have a good trading day,
Kevin Haggerty