If You See This Setup, Take It
What Monday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) declined again
yesterday
from the second attempt in the confluence zone at 1062.39 on Friday. It
closed
at 1047.10 in the bottom 20% of its range, which was narrow at 8.1 points
and
-0.6% on the day. Price is now back to that .382 retracement level and
pushing
the 1044.88 low from Nov. 7. The 20-day EMA is 1045.15. Breaking that low
price,
the SPX will seek the next levels, which are the .50 retracement of 1039.88,
then the .618 retracement at 1034.79, which also takes it below that
60-minute-chart trading range where price spent most of its time, except for
the
two runs at the 1060 level. You have that chart.
NYSE volume declined to 1.22 billion yesterday,
but any initial retracement doesn’t necessarily have to start with a volume
spike. The volume ratio was 28, but the four-day moving average is still 48,
and that’s not short-term oversold. Breadth went negative for the first time in
the past two weeks at -965, with the four-day moving average now negative for
the first time in two weeks at -20. With two weeks of the table completed, you
have seen how the volume ratio, breadth and five-day RSI have preceded price
down, in addition to weakening as the media empty suits were blowing the GDP
and earnings horn, etc., etc. You will most often, in the absence of any overt
news, see the same thing happen as the market prepares to turn up, again preceded
by the improvement in the dynamics.
| size=2> | size=2>Tuesday |
size=2>Wednesday
11/5 |
Thursday
11/6 |
Friday
11/7 |
Monday
11/10 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
1059.02
|
1054.54
|
1058.94
|
1062.39
|
1053.65
|
| color=#0000ff>Low |
1051.70
|
1044.88
|
1046.93
|
1052.17
|
1045.58
|
| color=#0000ff>Close |
1053.25
|
1051.81
|
1058.05
|
1053.21
|
1047.10
|
| color=#0000ff>% |
-0.5
|
-0.1
|
+0.6
|
-0.5
|
-0.6
|
| color=#0000ff>Range |
7.3
|
9.7
|
12
|
10.2
|
8.1
|
| color=#0000ff>% Range |
21
|
71
|
93
|
10
|
19
|
| color=#0000ff>INDU |
9839
|
9821
|
9857
|
9810
|
9757
|
| color=#0000ff>% |
-0.2
|
-0.2
|
+0.4
|
-0.5
|
-0.5
|
| color=#0000ff>NASDAQ |
1958
|
1959
|
1976
|
1971
|
1942
|
| color=#0000ff>% |
-0.5
|
+0.7
|
+0.9
|
-0.3
|
-1.5
|
| color=#0000ff>QQQ |
35.55
|
35.83
|
35.95
|
35.64
|
35.21
|
| color=#0000ff>% |
-0.6
|
+0.9
|
+0.3
|
-0.8
|
-1.2
|
| color=#0000ff>NYSE |
|
|
|
|
|
| color=#0000ff>T. VOL |
1.34
|
1.36
|
1.42
|
1.41
|
1.22
|
| color=#0000ff>U. VOL |
485
|
679
|
908
|
693
|
335
|
| color=#0000ff>D. VOL |
836
|
657
|
494
|
689
|
878
|
| color=#0000ff>VR |
37
|
51
|
65
|
50
|
28
|
| color=#0000ff>4 MA |
54
|
54
|
57
|
51
|
48
|
| color=#0000ff>5 RSI |
62
|
59
|
69
|
56
|
43
|
| color=#0000ff>ADV |
1677
|
1637
|
1893
|
1769
|
1146
|
| color=#0000ff>DEC |
1591
|
1590
|
1348
|
1475
|
2111
|
| color=#0000ff>A-D |
+86
|
+47
|
+545
|
+294
|
-965
|
| color=#0000ff>4 MA |
+440
|
+448
|
+491
|
+243
|
-20
|
| color=#0000ff>SECTORS |
|
|
|
|
|
| color=#0000ff>SMH |
0
|
+1.8
|
+0.5
|
-0.3
|
-2.4
|
| color=#0000ff>BKX |
-0.2
|
-.02
|
+0.6
|
-0.8
|
-0.3
|
| color=#0000ff>XBD |
-0.7
|
-0.7
|
+0.5
|
+0.9
|
-1.3
|
| color=#0000ff>RTH |
-0.8
|
-0.8
|
+1.0
|
-0.9
|
-0.6
|
| color=#0000ff>CYC |
+0.2
|
-0.4
|
+0.7
|
-0.3
|
-1.7
|
| color=#0000ff>PPH |
-1.3
|
+0.2
|
+0.6
|
-0.7
|
-0.7
|
| color=#0000ff>OIH |
+0.4
|
+0.9
|
+0.1
|
+0.4
|
-1.3
|
| color=#0000ff>BBH |
-0.5
|
+0.5
|
+1.1
|
-0.8
|
-2.7
|
| color=#0000ff>TLT |
+0.6
|
-0.7
|
-1.0
|
-0.06
|
-.08
|
| color=#0000ff>XAU |
+0.8
|
+.02
|
-1.9
|
+2.6
|
-1.2
|
The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) at 1942 was -1.5% and
the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s -1.2%, but for the first time in a while, all of the major sectors
were red, led by the semis, as the
(
SMH |
Quote |
Chart |
News |
PowerRating) closed at 42.92, -2.4%, having
backed off the confluence of four numbers you have in the Nov. 4 commentary.
The SMH hit a 42.46 intraday low on the 3:45 p.m. ET bar vs. the 2.0 volatility
band of 42.32. This was a narrow-range doji bar with a volume spike followed
by a bigger volume bar, as price moved up to the 42.93 close. The 20-day EMA
is below at 41.24 and where price is most likely to go, and you know that’s
good for this corner. Yesterday’s SMH price action reversed the previous four
closes, while the SPX reversed the previous seven closes.
For Active
Traders
The
(
SPY |
Quote |
Chart |
News |
PowerRating) started yesterday with an early
Flip Top range that broke to the downside and then made a weak attempt at a
contra move. There was a doji bar volume spike on the SPY on the 10:25 a.m.
bar,
followed by the signal bar, and entry was above 105.47 after the 105.35 low.
But
the SPY only traded to 105.63, and it took 30 minutes to do that, which is
not
what a good contra move does, in addition to the very light volume on the
increase in price which was also still below all of the 8-, 20-, 60- and 240
EMAs.
When the flag pattern reversed to the
downside,
you had reason to take a short entry. It was choppy and sideways from 12:00
p.m.
– 3:25 p.m. when the SPY traded down to new intraday lows of 105. If you
refer
to your 120-minute chart, you will see that the 104.90 level is the next
pivot
on the 1,2,3 higher top pattern which gave you entry below 106.61. I will
include that chart in tomorrow’s commentary. The same pattern in the
(
DIA |
Quote |
Chart |
News |
PowerRating)s
broke the pivot of 98 yesterday on the 11:30 a.m. bar, trading down to a
97.60
intraday low, closing at 97.81. Be sure to watch those 60- and 120-minute
charts, as they give you a very defined picture of the key short-term
levels.
For Today
As I do this at 8:00 a.m., the futures are a
bit
soft, with the Dow -17, Nasdaq -5 and S&P -2.50. The SPX has had two
days
closing in the bottom of its range, so there could be an intraday reflex up,
at
which point we will find out whether there is more downside to this move or
not.
The initial reflex up today might come from/or on a re-cross of the SPX
20-day
EMA of 1045.15, but if it reverses and there is a second-entry short setup,
daytraders, you should take it. 104.90 is a downside pivot for the SPY, with
the
20-day EMA at 104.94, while the DIA pivot is 98 and the 20-day EMA at 97.64.
You
take your guidance in the stocks relative to whether the major indices are
going
the direction of your trade. Market direction always supercedes any stock
setup.
In order to give us a good short-term trading move
into year-end, there has to be more retracement, and if not, it just weakens the structure
at higher levels in the confluence zone.
Have a good trading day,
Kevin Haggerty