Intraday Weakness Below Yesterday’s Major Index Lows Play From Long Side
What Thursday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) was a non-event all
day
with a range of just 4.6 points until the air pocket down from 3:15 p.m. ET
into
the close with the SPX declining about 8.3 points to 1175.61 and closing at
1177.44, -0.9%. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was -1.1% to 10,506, as was the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating), 2071, and the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) was -1.3% to 38.07. The sell
programs
lit up the board as the air pocket was futures driven with an overriding
negative news tone, in addition to oil plus about 3.5%.
NYSE volume was 1.51 billion shares, the
volume
ratio 37 and breadth only -289, which reflects the program selling, not
broad
market participation. So far, this key time week has kicked in and is -1.6%
from
the SPX high of 1194.78 on Monday to 1175.61 yesterday. Jan. 17 is the last
primary time date until mid-February, but the Exchange is closed on Monday,
so
that can precede or carryover a day or so.
In the sectors, it was energy and utilities
green, with the
(
OIH |
Quote |
Chart |
News |
PowerRating) +1.1% along with the
(
TLT |
Quote |
Chart |
News |
PowerRating), +1.0%, for the
seventh
up day in succession, in conjunction with the crude oil gain of 3.5%. The
PPH
lost 2.2% and the
(
SMH |
Quote |
Chart |
News |
PowerRating) -1.6%, while the rest of the red sectors were in
line with the SPX and Dow.
Unless you hit the sell buttons when the
programs
kicked in around 3:15 p.m., there was nothing exciting to do in the S&P
futures/
(
SPY |
Quote |
Chart |
News |
PowerRating). However, the SMH was a Trap Door/RST reversal above 30.98
with entry on the 10:00 a.m. bar which ran small to 31.27 (2.8x risk), then
retracing to 30.99 and back up to 31.26 before the late afternoon knife down
to
a 30.92 close. Price has certainly been active in the 31 – 30.50 part of
this
key zone.
The program slide didn’t keep the
homebuilders
from a big green day with
(
RYL |
Quote |
Chart |
News |
PowerRating) +3.1%,
(
BZH |
Quote |
Chart |
News |
PowerRating) +2.9% and
(
KBH |
Quote |
Chart |
News |
PowerRating)
+2.4%.
They certainly like the reduction in interest rates.
The IWM (Russell 2000), 121.73, hit a support
level on Wednesday with a 120.26 low, down 8.0% from the 130.66 rally high
on
12/31/04. What a coincidence. The IWM rallied 17% into year-end from the
10/20
112.07 low. 120 is the .38 retracement to the August 102.40 low, with the
.50
retracement and 200-day EMA down at 116.50 – 117. There is a positive
oscillator
divergence starting to form, so it is now a long focus from this
zone.
The QQQQ closed at 38.07, below its primary
momentum line, which is the 38.57 close in January 2004. That is the second
upside focus after the 38.27 15-week EMA level, while the 40-week is down at
36.84. Trading below 39 had put the 1,2,3 Higher Top in play on the weekly
chart, so nothing good can happen until that reverses. The rally into
year-end
from the August low put the CMO 20 (Chande Momentum Oscillator) to 62.43,
the
highest it’s been since the October 2002 low, so the intermediate trend was
certainly overbought.
Any weakness below yesterday’s lows for the
major
indices will be traded from the long side, especially the 37.60 – 36.50 QQQQ
price zone.
Have a good trading day, and have a great
weekend,
Kevin Haggerty