Look For Major Relative Strength Or Weakness
What Thursday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) 12.5 point wide-range-bar
up day was followed by a pause day yesterday with a range of just 6.7 points,
as the SPX closed at 1058.41, virtually unchanged from the previous 1058.53
close. NYSE volume was also about the same at 1.36 billion, with the volume
ratio neutral at 51, as is the four-day MA at 50. Breadth was on the plus side
at +467. The other major indices also finished pretty flat, but in the top 20%
of their ranges, which sets up inside-bar patterns for the
(
DIA |
Quote |
Chart |
News |
PowerRating)s and
(
QQQ |
Quote |
Chart |
News |
PowerRating)s
with entry above Wednesday’s highs. For the
(
SPY |
Quote |
Chart |
News |
PowerRating), it is above yesterday’s
high because of the marginal high yesterday above Wednesday’s 106.47 high.
| size=2> |
Friday
11/7 |
Monday
11/10 |
Tuesday
11/11 |
Wednesday
11/12 |
Thursday
11/13 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
1062.39
|
1053.65
|
1048.23
|
1059.10
|
1059.62
|
| color=#0000ff>Low |
1052.17
|
1045.58
|
1043.46
|
1046.57
|
1052.96
|
| color=#0000ff>Close |
1053.21
|
1047.10
|
1046.57
|
1058.53
|
1058.41
|
| color=#0000ff>% |
-0.5
|
-0.6
|
-.05
|
+1.1
|
0
|
| color=#0000ff>Range |
10.2
|
8.1
|
5
|
12.5
|
6.7
|
| color=#0000ff>% Range |
10
|
19
|
62
|
95
|
81
|
| color=#0000ff>INDU |
9810
|
9757
|
9738
|
9849
|
9838
|
| color=#0000ff>% |
-0.5
|
-0.5
|
-0.2
|
+1.1
|
-0.1
|
| color=#0000ff>NASDAQ |
1971
|
1942
|
1931
|
1973
|
1967
|
| color=#0000ff>% |
-0.3
|
-1.5
|
-0.6
|
+2.2
|
-0.3
|
| color=#0000ff>QQQ |
35.64
|
35.21
|
35.08
|
35.84
|
35.78
|
| color=#0000ff>% |
-0.8
|
-1.2
|
-0.3
|
+2.2
|
-.08
|
| color=#0000ff>NYSE |
|
||||
| color=#0000ff>T. VOL |
1.41
|
1.22
|
1.16
|
1.33
|
1.36
|
| color=#0000ff>U. VOL |
693
|
335
|
426
|
1.10
|
689
|
| color=#0000ff>D. VOL |
689
|
878
|
710
|
205
|
655
|
| color=#0000ff>VR |
50
|
28
|
37
|
84
|
51
|
| color=#0000ff>4 MA |
51
|
48
|
45
|
50
|
50
|
| color=#0000ff>5 RSI |
56
|
43
|
41
|
65
|
65
|
| color=#0000ff>ADV |
1769
|
1146
|
1308
|
2454
|
1861
|
| color=#0000ff>DEC |
1475
|
2111
|
1916
|
814
|
1394
|
| color=#0000ff>A-D |
+294
|
-965
|
-608
|
+1640
|
+467
|
| color=#0000ff>4 MA |
+243
|
-20
|
-184
|
+90
|
+204
|
| color=#0000ff>SECTORS |
|
||||
| color=#0000ff>SMH |
-0.3
|
-2.4
|
+0.3
|
+3.6
|
-2.0
|
| color=#0000ff>BKX |
-0.8
|
-0.3
|
-.09
|
+0.3
|
-0.1
|
| color=#0000ff>XBD |
+0.9
|
-1.3
|
-0.6
|
+1.1
|
+0.1
|
| color=#0000ff>RTH |
-0.9
|
-0.6
|
+0.3
|
+0.3
|
-1.6
|
| color=#0000ff>CYC |
-0.3
|
-1.7
|
-0.2
|
+1.4
|
-.03
|
| color=#0000ff>PPH |
-0.7
|
-0.7
|
+0.3
|
+1.8
|
+2.9
|
| color=#0000ff>OIH |
+0.4
|
-1.3
|
-.05
|
+0.6
|
+2.0
|
| color=#0000ff>BBH |
-0.8
|
-2.7
|
-0.3
|
+2.3
|
+1.4
|
| color=#0000ff>TLT |
-0.06
|
-.08
|
0
|
+0.7
|
+1.6
|
| color=#0000ff>XAU |
+2.6
|
-1.2
|
+0.3
|
+5.6
|
-0.6
|
In the sectors, the leaders were the PPH, +2.9%,
OIH, +2.0%, and BBH, +1.4%, all of which had sold off while technology and the
major indices have worked higher, but with narrowing range, rising price and
a negative divergence in momentum. If you look at your SPX daily chart, you
will see what I mean. After the SPX 1040.29 high on 9/19 and then a retracement
to the 990.36 low on 9/30, it has been a rising price and narrowing wedge up
to this 1060 zone that the SPX has been churning in for the past nine days,
with the high close at 1059.02 and low close 1046.57. This range will be resolved
quickly, if not today. The banks and brokers were flat yesterday, while the
RTH was -1.6% and retail has not acted well relative to the market over the
past week. The
(
SMH |
Quote |
Chart |
News |
PowerRating)s, which are a thrill a minute, gave back a little over
50% of the previous day’s +3.6% gain, closing at 43.79, -2.0% on the day.
For Active Traders
Narrow-range days for major indices and that
are
also small on intraday travel range take away most of the ammo for
daytraders,
which was the case yesterday. There was only a 5.5 point early SPX decline
into
the 10:45 a.m. ET bar, then it was choppy until a 4.5 point up move into the
close starting around 2:45 p.m. There were, however, things to do in
individual
stocks in the biotech, oil service and drug groups, which were up +1.0%,
+1.5%
and +1.3% at 9:45 a.m., while the major indices were all red, with the
SPX -3,
Dow -46, in addition to the QQQs and Nasdaq, which were also on the red
side.
When you see this kind of divergence and relative strength, you certainly
start
scrolling stocks in those sectors for setups. Early up in the first 30
minutes
usually means there will be at least one consolidation or retracement, and
that
is what you are scrolling for.
For example, see the 25-bar Slim Jim on the
five-minute chart for
(
GENZ |
Quote |
Chart |
News |
PowerRating) between 45 and 44.75 that broke out on the
12:30 p.m. bar, running to a 46.11 high. If you were scrolling oil service
stocks, you saw early up openings, then Gap Pullback setups, which are in
the
First-Hour Strategy module. If you checked the drugs, you found good
retracement
setups, like
(
MRK |
Quote |
Chart |
News |
PowerRating)‘s retracement to the 20-period EMA on the five-minute
chart that then took off and ran 1.5 points on the continuation move.
I am not trying to recap just a good trade
for
you, but I am making a key point. This point is that you should always be
looking for any major relative strength or weakness after the 9:30 opening
and
then scroll those stocks for trade setups. If you just trade the E-minis, in
narrow-range days like yesterday, it sharply curtails your playing field.
For Today
For today, the initial breakout levels are
98.95
on the DIAs, 35.96 on the QQQ and 106.54 on the SPY. When you get a pause
day,
which is also an inside-bar day that follows a wide-range-bar up day which
closed in the top of the range, then if you get a trade-through entry today,
you
have to take some position on the first entry, especially if the early tone
is
good, and also because any breakout of this range can run quickly to 1068,
which
is the .382 retracement to 1553 from 769, and 107.10 is the SPY equivalent.
I am
talking daytrade here, NOT position trade, which shows me no edge unless the
negative momentum were to change.
Have a good trading day,
Kevin Haggerty