If The Game Is On, Here’s The Most Profitable Trade
What Monday’s Action Tells You
The SPX
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PowerRating) closing price of 993.71
vs. Friday’s 993.06 with an intraday trading range of just 5.8 points, in
addition to NYSE volume of just 950 million tells you what kind of day it was.
Breadth was -644 with a volume ratio of 38. Essentially, the closing range was
the entire day, with a 993.71 high and 987.91 low. The 20-day EMA going into
yesterday was 990.57, and the monthly pivot is 987.27, so we start today with
the same awareness levels as yesterday.
If you are keeping the intraday dynamics table,
you see that the major sectors were red all day yesterday, with the exception of
the
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closed at 9317.64, -0.3% after a closing mark-up, and had an intraday low of
9281 vs. its 20-day EMA of 9283.98.
The INTC “game” was short-lived, as the major
indices like the Dow and Nasdaq
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PowerRating) have come back to below their
previous rally highs, but this sets up a potential second-entry long trade on a
re-cross of those July highs.
For Active Traders
There were small opportunities yesterday, as the
SPX gave you a 1,2,3 higher bottom entry above 989.90, which only traded up to
993.71 during the last hour. The E-mini entry was above 989.75, trading to a
994.25 high. The problem was it ran to 993, back to 989.50, then to 994.25, so
most traders probably scratched the trade at breakeven to plus a little and may
or may not have taken the 2:00 p.m. ET E-mini entry above 990.25. Either way,
the decision was correct because there was no enthusiasm in the market and the
dynamics were flat. If you trade the E-mini in conjunction with your SPX chart
— as you should — you would not have scratched the trade because of its higher
low.
The
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35.85, which was right at the 240 EMA, with entry above 35.88 on the 12:15 p.m.
bar. I thought there would be some interest on the quick pullback to the 35 – 36
zone after the overexuberant move to 37.86 the previous day, but the volume
didn’t show up, and the SMHs only traded up to 36.13, then went sideways until
making a new intraday low of 35.80 on the 2:40 p.m. bar, also on very small
volume, which was indicative of no players on the field yesterday. This new low
did set up an RST buy pattern with entry above 35.90, which didn’t happen until
the 3:05 p.m. bar. But once again, there was no real move, and the SMH only
traded to 36.02.
Today’s Action
The immediate downside awareness levels for the
SPX on Tuesday are the 20-day EMA at 990.87 and the 989.27 monthly pivot. Just
above yesterday’s 993.71 SPX close is the 240 EMA, which ended at 995.05. There
is an 8:30 a.m. Durable Orders number today, which could force the “game”
players to show up and accelerate direction, forcing some openings which set up
the favorite Trap Door pattern.
There is also the “funny money” Consumer
Confidence number at 10:00 a.m., which is usually good for some manipulation of
the futures, especially if the Generals are not that active during this prelude
to the Labor Day long weekend. The expected numbers are 1.0% on the Durable
Orders and 79.6 on the Consumer Confidence, but the key point here is that we
want to trade any overreaction to those numbers, not taking a position in
anticipation of a better-than-expected number on something that is always
getting revised and whose reliability has proven to be extremely suspect. It’s
fool’s gold to play the anticipated reaction and much more profitable to fade
the overreaction if the “game” is on, as those that know like to say.
It would be very easy to get the Dow and Nasdaq
above their July highs of 9353 and 1776, which would force some buyers into the
market during this slow week, especially since it would be a second entry above
the rally magnets. The Nasdaq closed at 1764.51 and Dow at 9318.
The SMH closed in a Slim Jim-like range between
36.08 and 35.80. It closed at 36.04, which is above all of its 8-, 20-, 60- and
240 EMAs, while below 35.80 is the reverse. This kind of setup always provides
opportunity. INTC, as you would expect, has a similar range pattern, 27.38 –
27.07 and has given back 7.5% of its 10% mark-up to 29.04 on Friday. INTC closed
at 27.24. If the SMHs are to have a decent move today, INTC must come out of its
range also.
Have a good trading day,
Kevin Haggerty
