Objective Secured
Yesterday’s
pop in the major indices led
by the semis with the
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$SOX.X |
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objective in the
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SMH |
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confluence yesterday. I had anticipated a 15%-20% bounce from the .618
retracement to the September low as I had mentioned in previous texts when both
the semis and Nasdaq patterns unfolded into the anticipated reversal zone. The
SMHs hit the +20% rally high in just six days, which was 43.74, with yesterday’s
intraday high at 43.81. They closed at 43.45.
In addition to the 20%
gain, the SMHs hit a confluence of numbers yesterday which said time to jump
ship. The .618 retracement to the last swing point high of 48.10 is 43.65, which
is also the 144-day EMA. The 89-day EMA is 43.40. At 43.74, the rally hit the
20% number, and in just six days. Just above, we have 44.50, which is my upper
proprietary percentage deviation band off a shorter-term moving average, which
has meant reversal zone for the last seven swings since November of last year.
Last but not least is the 200-day EMA at 44.72. This all adds up to me as
"See you later," or until the next pullback, for longs, and we’ll play
the shortside if the rally carries a bit more or if it breaks yesterday’s
closing range.
NYSE volume jumped to 1.4
billion yesterday, a volume ratio of 80, with 1.1 billion on the upside. Breadth
was very positive at +1195. It was a broad sector advance, with the biotechs
+6.3% and have now moved back up to the 20-day EMA, software at +6.4%, and also
good gains in the banks, brokers and retail, which I always like to see
accompany any tech advance.
The stealth bull market
remains in force, as the
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IJR |
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127.50 vs. its all-time high of 128.70 made in April. It was the same for the
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MDY |
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made in April of 101.67. The
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moving averages, closing at 102.98. The .618 retracement to the last swing point
high of 106.73 is 103.44. The tech bear market has the NDX
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SPX
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above September lows. For the equivalent move that the sequence trader just had
in the SMHs, the SPX would have to trade at 1259, the NDX 1370, and the Dow
11,800.
As you certainly know by
now, I am never enthusiastic about buying anything on the third day after two
wide-range-bar up days, plus a gap. Yesterday’s gap open and subsequent trading
took the major indices and some sector proxies, like the SMHs, out to the 2.0
volatility bands where they remained in Slim Jims for the remainder of the
session. Be ready to play these ranges both ways, and don’t be surprised if the
first breakout results in a pattern failure, and then a move in the opposite
direction. It is expiration week, and the program gang is still in charge. They
have a choice of accelerating greed or taking them down which would instill the
ever-present fear in the current nervous longs.
Stocks
Today
In the semis, strictly
working off the intraday charts, won’t take any first continuation breakout
entries above yesterday’s high. We’ll let price come to us, probably after short
entry from yesterday’s closing range.
Some mundane stocks that
did not have the big gaps yesterday, but still set up on the daily charts are
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UTX |
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JNY |
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LOW |
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TIF |
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MYG |
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KEY |
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WFC |
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FITB |
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NAV |
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ESL |
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WLP |
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THC |
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NKE |
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PowerRating).
Keep watching that
dollar/gold/stock relationship. Dollar up, gold stocks down, stocks up. If you
take a look at the dollar pattern on your chart, you’ll see it’s exactly the
same as the SPX. Watch those closely during the day for any early
read.
Have a good trading day.
Five-minute chart of
Tuesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Tuesday’s NYSE TICKS