No Edge
The
muscle used to get the S&P futures +10 and the Dow futures +100 at 9:00 a.m. ET
disappeared on the 9:35 a.m. bar, and it
was trend down to 891, which is the .618 retracement to 965 and is constantly
coming into play during this trading range action. The intraday high was 907.44
on the second five-minute bar which was right at the numbers
mentioned yesterday. From 891 there was a 13 point retracement to 903.88,
then trend down again into the close of 890.14, right on the number once again.
There was a head-and-shoulder pattern short entry below 897.68 which traded down
to an 886.15 intraday low.
Sequence traders had a
good day, as the .618 retracement level of 890 was also a .50 retracement to
Friday’s 877 low, so you caught a trade there, and then a .786 retracement to
the 907.44 intraday high which was followed by the head-and-shoulders short
entry. In spite of the fact that the SPX is still rangebound, futures and proxy
traders had some decent trade setups yesterday.
NYSE volume was 1.4
billion, volume ratio of 57, and breadth -422. Certainly no significant selling
pressure approaching month end with the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) -0.8%, the Dow
(
$INDU |
Quote |
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News |
PowerRating)
-0.9%, and Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) -1.1%. The
(
SMH |
Quote |
Chart |
News |
PowerRating)s finished -0.2%, but
provided some action as it hit the wall with a 24.53 intraday high vs. the 24.66
.618 retracement to 29.20. Yesterday’s high of 24.53 puts the SMHs +42% from the
17.32 low in just 14 days. How could you not be involved at a key inflection
point on an extended move like that, and playing SMHs from the short side and
again on any month end strength?
I don’t see much upside
room short term on a breakout of this current SPX trading range without some
sort of a pullback. The .786 retracement to 965 is 923. There is
head-and-shoulders resistance at about 930, a 2.0 longer-term volatility band at
935. That all amounts to another 3.0% to hit the high end of that resistance.
That is not what I call a positive mathematical edge. We had that 42% ago on the
SMHs and 18% on the SPX at key inflection points where you might risk 3% – 5% to
make 15% to 20% on a strong reflex move. Now that we have rallied, I am
surprised at how many people think it will be a roaring bull market and can just
buy highs again. Good luck because you won’t see another bubble like that in
your trading lifetime unless you are trading 51.6 years from now. Keep your ammo
dry, there will be a pullback.
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS