Look At This Divergence
What Wednesday’s Action Tells You
The market action yesterday told us little, as it
was a non-exciting narrow-range day of less than 10 points for the SPX
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PowerRating) and the travel range was choppy with the trend down until just
after 2:00 p.m., when they traded up into the close of 1033.78, -0.6% on the
day. The Dow
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PowerRating) at 9631 was -0.3%, with the Nasdaq
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1894 and
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PowerRating) at 37.37 were both -0.7%, while the
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PowerRating) at 34.35 was
-0.9%. NYSE volume of 1.2 billion was again on the lighter side, while the
volume ratio was 39 and breadth fairly neutral at -265. Coming into the day it
was short-term overbought with the five-day volume ratio at 72. The major
sectors were also nondescript and in line with the major indices.
For Active Traders
It wasn’t a very good trading day, as the first
two Trap Doors only reversed up enough so that you were able to move to
breakeven and scratch the trades, as the SPX reversed to the downside. Certainly
not a bad thing if you can enter a trade and scratch it if there isn’t
sufficient follow through to even take one-half of the position off. The short
side wasn’t compelling because there was no hard selling of stocks by the
Generals. It was mostly drift.
There was a decent opportunity in either the
futures or
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PowerRating) in the afternoon reflex up into the close, which came after
a re-cross of the 240 EMA on your five-minute chart. The SPY ran from 103.60 to
the 104 close. If you are trading a range, then you might have gotten involved
on the short side after the first five-minute bar reversed yesterday’s SPX high.
Yesterday’s SPX high was 1040.08 vs. the previous day’s 1039.25. The second Trap
Door carried back up to 1039.04 from a 1035.30 low before trending down again.
After yesterday’s trading, the SPX remains
rangebound with a short-term negative divergence in momentum. I have included
the 60-minute SPX chart in today’s commentary, which includes the five-day rally
off the Sept. 30 990.36 low, which as you can see, started with a positive
divergence in momentum. (I would normally have the Chande momentum 20-period
oscillator on the chart, but TradingMarkets uses Qcharts for the commentary and
for some reason, they don’t have that specific indicator, while most other
vendors do. The regular 20-period momentum oscillator comes close most of the
time.)
Have a good trading day,
Kevin Haggerty
