If You Played Both Of These, Congrats
What Thursday’s Action Tells You
The 8:00 a.m. ET pre-market red emotion yesterday
was quickly dissipated by 9:45 a.m. At 8:00 a.m., the Dow futures were -71, the
S&Ps -7 and the Nasdaq -17, and at 9:45 a.m., the Dow was only -22 and SPX just
-2. The initial gap down openings for the major indices and HOLDRs, especially
the
(
SMH |
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PowerRating)s, triggered the First Hour reversal strategies. Pre-market futures
activity, along with the overreactions, are a daytrading bonanza, as it is to
the professionals, such as market makers and specialists. Any time you’re on the
opposite side of these overreactions, you have the highest probability of
profit. NYSE volume was again on the high side at 1.6 billion, the volume ratio
neutral at 51 after all the early noise, as was breadth, just -128.
At the close, all of the major sectors, except
the SMHs, -1.6%, and
(
OIH |
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PowerRating), -0.3%, were green, led by the
(
PPH |
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PowerRating) +1.4%,
as
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LLY |
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PowerRating) led at +6.9%. This was a good turnaround from the early gap
openings for the sectors. The semis were led down by
(
KLAC |
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PowerRating), -7.9%, on a
missed growth forecast number, and that took
(
AMAT |
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PowerRating), -3.2%, and
(
NVLS |
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PowerRating), -1.9%, with it.
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INTC |
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PowerRating) closed at 31.24, -0.9%.
Some of the momentum stocks continued to take
hits, like
(
MERQ |
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PowerRating). -10.8%,
(
AVID |
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PowerRating). -4.6%,
(
ERTS |
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PowerRating). -3.9% and
(
ZBRA |
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PowerRating). -3.6%, just to name a few.
For Active Traders
I have included in today’s commentary charts of
the SMH, SPX
(
$SPX.X |
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PowerRating) and the S&P E-mini which shows you the First Hour
reversal strategies. The SMHs showed the most emotion by opening down 3.1% from
the previous 39.13 close. The 2.0 volatility band was 37.65, and the intraday
low was 37.88 on the very first bar. You either faded it on that first bar
because of how the E-mini and SPX looked, or worst case, entry was above the
38.06 high of the second bar. The SMH ran to 38.55 by the 10:25 a.m. bar, then
retraced for a 1,2,3 higher bottom with entry above 38.11 on the 11:35 a.m. bar
(1,2,3 higher bottom not labeled on chart). The SMH then ran to a 38.61 intraday
high, closing at 38.52. The chart just shows the first hour volatility band
entry.
Next, take a look at the SPX chart. You’ll see
that it hit 1025.87 on the opening bar vs. the 1024 – 1025 natural square and
Cardinal numbers mentioned in yesterday’s commentary. The initial Trap Door ran
right to 1031.62 on the 10:25 a.m. bar, then retraced to a 1026.10 double
bottom, and then took off to a 1035.44 intraday high, closing at 1033.77. If you
played both the Trap Door and 1,2,3 double bottom, congratulations.
The third chart to look at, and the one that I
thought had the most compelling reason to confirm the early market reversal, is
the S&P E-mini chart. At 8:00 a.m. ET, the future hit a 1022 low and then a 1021
low on the 8:20 a.m. bar. The jobs claims number came out at 8:30 a.m., which is
the current media fixation, and then the E-mini traded into a 1 point 11-bar
Slim Jim between 1024.25 – 1023.25. The Slim Jim breakout came on the 9:30 a.m.
bar (1). In addition, the SPX having hit the top of confluence with the 1025.87
low. The E-mini ran to 1031.75 before retracing to the Slim Jim breakout level
with a 1024.50 low, which was also a 1,2,3 higher bottom. The move from there
ran to 1034.50, so if you missed the initial 9:30 a.m. Slim Jim breakout, you
had a second chance, but if you missed both of them, go back and read the
seminar material sections for these strategies.
For Today
After yesterday’s recovery from the gap down
openings, the major indices are not at the short-term oversold levels that
interest me, and not oversold enough to present a higher probability short-term
position trade. That, of course, doesn’t apply to daytraders, as opportunities
are excellent in this kind of volatility.
For the SPX, which has declined -2.6% so far from
its rally high of 1053.79 to yesterday’s intraday 1025.87 low, we start out
today with the 1025 -1020 zone just below, then the .618 retracement of 1015.
The 89-day EMA is 1003.66. A 5.0% decline from the 1053.79 rally high takes the
SPX down to 1001, and at that level, it would probably be short-term oversold.
On the upside, the first pivot for daytraders to
work against both ways today is the 20-day EMA of 1034.39, just above the
1033.77 close.
(
MSFT |
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PowerRating) is trading down pre-market on a report, while the S&P
futures are -3, Dow -33 and Nasdaq -11.50 as I do this at 7:30 a.m. ET. The
better index setups early today would be a flash test or breaking of yesterday’s
lows, then a reversal of those lows. Should there not be an early decline and
you play a trade through of the 1034.39 20-day EMA, be ready to double up and
reverse to the short side on any failure. I use the SPX as a proxy because most
big cap stocks will move in concert, except for those with significant stock
specific news.
Have a good trading day,
Kevin Haggerty
