Keep Playing The Extreme Reactions
The
first SPX
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carried to an 864.65 high on Monday.
Yesterday we got a chance to play again. If you took the first entry after
842.62 and got stopped out, join the crowd. The second entry was above either
841.29 or 841.09, depending on which narrow-range signal bar you used. The
intraday low was 840.19 on the 11:25 a.m. ET bar. The trade only ran to 848.36
before backing off, but with that late 20-minute move into the bell, closed at
848.13, or -1.4% on the day. The late rush into and after the bell on the
proxies certainly wasn’t the Generals. The trades keep coming at the key levels,
so stay on top of them. It’s all herky-jerk action, and as I have said, long
term is after lunch.
NYSE volume yesterday was
1.4 billion, the volume ratio 24, and breadth -541. The
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-0.4%, as the semiconductor world hasn’t quite collapsed yet on the
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news. I don’t think that I have ever seen such a mix of different opinions on a
sector since I have been in the business. That just points out how fragile and
dangerous it is to rely on the analytical opinions hyped in the media. Price
action rules, as money moves stocks and the Generals can’t hide.
I would imagine that
everyone will be glued to the TV today, and I don’t expect any trading
opportunities until after the reaction to Powell’s speech. Obviously, you
are not going to be unhedged long in front of that speech that the media will
certainly expand to their maximum benefit.
The Dow
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in a 2.9% range between 8158 and 7917 for the last seven days, while the SPX has
ranged between 870 and 840 for the same time period. Expect that to be resolved
quickly. Subtract the SPX 30 point range from 840 and it takes you right down to
the .786 retracement zone, which is 808.
Looking at my index
screens (see below) this morning, I see that of the first 20 names ranked by
“percentage change above 30-day average volume,” I see that only two of the 20
finished the day with a gain. In fact, I could increase that to the first 100
S&P 500 stocks listed, and the negative ratio wouldn’t change much. Kind of
tells you where the sense of urgency is. The only real thread was some of the
oil service stocks coming out of ranges, like
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Keep your powder dry, and
keep playing the extreme reactions. There’s not much else we can do.
Have a good trading day.
Five-minute chart of
Tuesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Tuesday’s NYSE TICKS