Know Your Levels
It was
a relatively quiet expiration, as
NYSE volume was only 1.27 billion, or about 90% of its average. The volume ratio
was neutral at 48, and breadth positive at +430. The Dow
(
$INDU |
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PowerRating) ended at
8778, -40 points, or -0.5%. Friday was the seventh day with highs from 8700 –
8854, as the Dow churns up against resistance. It is in a 10-bar trading range
on your 60-minute chart between 8835 – 8710. The 20-period EMA on the 60-minute
chart is 8728.
If the trading range is
resolved to the downside, then know your Fib retracements to last Wednesday’s
low of 8368 so you are ready for any intraday setups at these awareness levels.
The 20-day EMA on your daily chart is 8600, which is just above the .618
retracement at 8554. On the upside, if there is continuation on the daily chart
pattern, you have the 50-day EMA at 8866, along with point-and-figure resistance
and upper Bollinger Band from 8900 – 9100.Â
I suggest you frame the
SPX
(
$SPX.X |
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PowerRating) and Nasdaq
(
$COMPQ |
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PowerRating) the same way so that you are
prepared in advance to react quickly. We can’t know whether the Generals will
throw money at the market at these short-term overbought levels, which would
certainly catch the shorts even more, or will they back off and watch the
earnings reported as the markets enter a very weak seasonal period. This week
brings us reversal dates of Aug. 21 and 22. This is the third week of rising
prices and declining volume for the Dow specific, which is always a red flag for
me.
Stocks previously
mentioned, such as
(
IBM |
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PowerRating) and
(
WLP |
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PowerRating), have made moves above resistance,
and those are the kind of stocks that I now look to for intraday setups. It is
also time to scan the weekly charts and make a list of those big-cap stocks that
are setting up. We can’t know whether any seasonal selloff will break the lows,
test the lows, or just pull back in the current 1,2,3 patterns that we see on
the daily charts. The semis must go if the market is to sustain any more of this
move.
I look at the weekly
charts and see stocks like
(
NVLS |
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Chart |
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PowerRating) that had a Change in Direction week with
a higher high and low, close in the top of the range, and above the previous two
weeks’ highs and above the last three weeks’ closes. As you see on the weekly
chart, last week’s action broke it out of a three-week dynamite triangle.
(
AMAT |
Quote |
Chart |
News |
PowerRating) also had a Change in Direction week with a top-of-the-range close
above the last four weekly closes and above the previous week’s high on
increased volume.
The other major semi
equipment stock,
(
KLAC |
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Chart |
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PowerRating) closed in the top of the range on an outside bar
above the last four weeks’ closes and above the previous week’s high. The
(
SMH |
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News |
PowerRating)s, of course, also had a similar chart pattern for those of you that
prefer to trade just the HOLDRs. You should also look at
(
MCHP |
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PowerRating),
(
TXN |
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News |
PowerRating),
(
NSM |
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PowerRating) and
(
MU |
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News |
PowerRating) for similar weekly chart patterns. These weekly chart
patterns are positive alerts in a group the institutions love to run, so we must
be alert to all intraday setups based on these weekly chart patterns in spite of
the current disagreement between analysts on this group.
FYI: The best trade in
the SPX Friday was the Trap Door with entry above 920.37 which carried to 935.24
before a pullback. It closed at 933.79, almost flat on the day at -0.2%. The
50-day EMA is 934.29, with the other resistance mentioned last week that goes
through 950.Â
Have a good trading day.
Five-minute chart of
Friday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Friday’s NYSE TICKS