If It Doesn’t Move, Don’t Trade It Just Because You Think It Should
On
Friday, the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) went up, sideways, up,
as option expiration was on the buy side.
Thursday was a primary cycle date, as the SPX hit an 880.32 intraday low, but
closed at 884.25. Since the Dec. 2 954.28 rally high, the SPX has yet to close
below the 883.36 level, which is the .38 retracement to the October low. Below
that, there is some confluence at 860 – 865, and then again at the 840 level.
Friday was also a short-term three-day oversold situation, as evidenced by the
three-day volume ratio moving average, which was less than 30 as I mentioned on
Friday morning, and also the breadth had a three-day moving average of -664.
NYSE volume expanded to 1.8 billion, a volume ratio of 76, and breadth was
+1058.
The extent of the
expiration programs is pointed out with the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) ending at +1.8%,
the SPX +1.3%, while the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was only +0.7%, and the NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) +0.8%. The institutional program game is primarily the S&P 500,
and that’s why it is so beneficial for daytraders to focus on these stocks.
Programs can make you right for the wrong reasons.
It was a mixed bag in the
sectors, as the BKX and XBD outperformed at +2.4% and +2.3%. The OSX with the
war rattles was +2.9%. The basics were market performers, with the CYC cyclical
index at +1.7%, with the biotechs putting in the same number. The RLX, which is
the retail index, and the semis were laggards and were in line with the NDX’s
smaller gains.
With Friday’s 895.76 SPX
close, the 50-day EMA is again in play at 899. The 20-day EMA is at 902.86, and
the 89-day is 905.02. When moving averages get this close together, it usually
precedes a move away from the zone. A break below the head-and-shoulders
neckline is at 880, while upside breathing room is above 911.22. In between, it
will be all noise.
I do care about the SMHs
here, which hit 22.70 on Thursday vs. its 22.54 .618 retracement level and
closed Friday at 23.30. This is right at the three-month regression channel
lower band, while the rally had previously halted at 31, right on the upper band
at the time. When I say I care, all I mean is that this is a key awareness zone,
and I am ready to capitalize on the buy side if the Generals show up in this
zone. As mentioned in previous commentary, the .618 22.54 to .786 20.25 level
has to hold because the rest of the market is going nowhere unless the semis
rally from this retracement after the 80% rally off the October lows.
During this overhyped
seasonal time, I prefer to just scroll the intraday charts for Slim Jims and
also the first intraday breakouts to new intraday highs. If there is early
weakness today, then I will look for Trap Doors and Opening Reversals for long
entry. I have no interest from this corner on the short side into year-end. If
it doesn’t move, don’t trade it just because you think it should. This is my
last commentary until Friday, so I wish you all a very merry and holy Christmas
or happy holiday.
Have a good trading day.
Five-minute chart of
Friday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Friday’s NYSE TICKS