Key price zone for this market
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The SPX bounced to a
1272.15 intraday high from the primary price zone and short-term
oversold condition, closing at 1267.03, +0.4% and -1.8% on the week. This was a
positive to the carryover action initiated on Thursday into the close (5/19/06
commentary). The QQQQ was 0.1%, Nasdaq +0.6% and the Dow +0.1%. On the week,
they were -2.0%, -2.2% and -2.1%. NYSE volume on Friday–which was also an
option expiration–expanded to 2.2 billion shares with the volume ratio 62 and
breath +579. The brokers (XBD), +1.5% and SMH, 1.4%, led the sectors on
Friday, while on the week the story was the commodity sector decline from very
extended levels. The XAU was -12.5%, OIH -7.6%, XLE -4.8% and the CYC, -3.3%.
The XLE and many of its component stocks bounced
off their 200-day EMA zone on above average volume, while the XLE traded 40.3
million shares. This one-day level of volume preceded price reversals in March
and April 2006. The SPX volume on Friday was the most since 9/16/05, which was
also an option expiration. However, it wasn’t at a significant price zone as the
SPX is now, in its first retracement to its 200 – 233 day EMA since the 10/13/05
1168.20 low. This has been a nine-day -5.3% knife down from 1326.70 to Friday
1256.28 low. The 200-day EMA is 1262.84, 233-day EMA 1255.81 and just
below this is the 1254, .618 retracement from 769 (10/10/02 low) to 1553
(3/24/00 high). This primary retracement also comes into play in both
directions.
If the Generals are going to put their money where their positive marketing spin
is–you know, "good forecasts sells stocks, bad ones don’t"– then this is the
most likely zone for them to show us the money,
Have a good trading day,
Kevin Haggerty