My Checklist For Monday
Returning after three days away from the market, I must get my head back into it, so let’s get started. Thursday and Friday had NYSE volume of 720 and 758 million, respectively, with the Dow
(
$INDU |
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PowerRating) -1.7% for the two days, the SPX (
$SPX.X |
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PowerRating) -1.9%, the Nasdaq
(
$COMPQ |
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PowerRating) -1.7%, and the NDX (
$NDX.X |
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PowerRating) -2.5%. The volume ratio has a three-day moving average of 32, while the three-day moving average of breadth was only -210. That tells me that prices declined under their own weight as the Generals didn’t show up, but certainly not a significant short-term oversold condition.
On Friday, not one stock in the SPX and NDX closed in the top 25% of its range. Also, 76 of the 100 stocks of the NDX closed in the bottom of their range. There certainly has to be some tech selling and portfolio cleansing of many of the dogs into year-end. Putting the major indices under my “820” trend check, I see negative positions for the SPX, Dow, QQQs and SMHs. My “820” trend check consists of the weekly, daily, 60-minute and 15-minute time periods using an 8 and 20 EMA on all of them. Right now, the 8-period EMA is below the 20, with price below both declining EMAs in all time periods for all of the major indices and SMHs. I do the same quick check for the major sectors to see if anything is bucking the trend.
Next I look to what Fib levels are in play relative to Friday’s closes. The Dow closed at 8304 with the .50 retracement at 8120 and .618 at 7908. 8100 is also the low end of a three-month regression channel. Looking at the SPX, I see the .50 at 861 and the 1.618 Fib extension of the last leg up at 865. The .618 retracement is at 840. In both cases, there is some other confluence at both levels.
For the QQQs which closed at 24.82, you have the .50 retracement at 24.27 and the .618 at 23.21. The SMHs closed at 22.98 and have held the .618 retracement of 22.54 several times. The .707 is 21.33 and the .786 is 20.25. I also see some other Fib time sequence in play, which is Dec. 27 the 2.0 ratio from the July 24 and Oct. 10 bottoms, and also Dec. 30 which is the 1.27 ratio using the Aug. 22 and Dec. 2 tops. If you have any interest in these, e-mail me and I will tell you how to get them from a free source.
Today and Tuesday are the last two trading days of the year, with next Thursday the first trading day of the new year. The first five 2003 trading days extend to Jan. 8. Seasonality is in your favor, so be careful on the short side. People that play this seasonal trade bought the close on Friday for the major indices.
For the SPX, the lower regression line right now is at about 850, straddling the .50 and .618 retracement levels. The last time the index was on a lower line was the Oct. 10 bottom. One of my primary momentum oscillators, which is the Chande 20-period, is at -40, and most tops and bottoms occur at the +/- 50 level. That also indicates the major indices are also not at what I consider a high-probability reversal zone.
The news overhanging the market is intensified, with Iraq, North Korea, Venezuela and a doubling of our troops in the attack zone. John Q. Public is not going to rush in and buy stocks under that umbrella, and neither will many portfolio managers, especially the young ones. Going forward the next few years, the highest probability is some kind of trading range market that will benefit those that can trade moves both ways.
For today, the 1,2,3 trend entry from Friday’s five-minute chart action is above 878, with early pullback entry above 876.12. The 8 EMA on the 15-minute chart is 876.53, with the 20 EMA at 879.38. Do the same for whatever else you trade. If you trade S&P futures, key off the SPX cash index. The QQQ 1,2,3 five-minute chart trend entry is above 24.89, the 8 EMA at 24.86, and the 20 EMA at 24.96.
Hope you enjoyed the look and got some ideas from it. The game is on.
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