One Of My Favorite Patterns May Be Setting Up
What Wednesday’s Action Tells
You
It was a wide-range-bar day, as both the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) and Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) made new intraday and closing highs.
The
SPX went out at 1157.76, +1.1% and the Dow at 10,738, +1.2%. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) closed at 2090, +0.7%, certainly lagging. The Nasdaq high
was
2153.83 on 01/26, and closed there. The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s with 37.58 yesterday,
+1.1%
vs. its 39 high on 01/20. NYSE volume was good as it expanded to 1.63
billion,
with 1.26 billion up for a volume ratio of 78 and 4 MA now 69. Breadth
increased
to +1244 and the 4 MA now +1165, both short-term overbought, but can be
offset
for a short period of time by the new rally highs and get even more
overbought.
The primary trend has been up, so the game is
to
buy short-term oversold conditions on retracements, while any continuation
up
can continue to get more short-term overbought for a longer period of time.
Intraday short setups can still be taken, as opposed to any naked positions
based on the short-term overbought condition.
The market action was similar to what we have seen
on previous +1.0% or more days. The brokers, which is the XBD, was +3.9%,
(
SMH |
Quote |
Chart |
News |
PowerRating)
+1.7%, and CYC +1.5%.
| size=2> |
Thursday
2/5 |
Friday
2/6 |
Monday
2/9 |
Tuesday
2/10 |
Wednesday
2/11 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
1131.17
|
1142.79
|
1144.46
|
1147.02
|
1158.89
|
| color=#0000ff>Low |
1124.44
|
1128.39
|
1139.21
|
1138.70
|
1142.33
|
| color=#0000ff>Close |
1128.59
|
1142.76
|
1139.80
|
1145.54
|
1157.66
|
| color=#0000ff>% |
+0.2
|
+1.3
|
-0.3
|
+0.5
|
+1.1
|
| color=#0000ff>Range |
6.7
|
14.4
|
5.2
|
8.3
|
16.6
|
| color=#0000ff>% Range |
62
|
100
|
11
|
82
|
92
|
| color=#0000ff>INDU |
10496
|
10593
|
10579
|
10614
|
10738
|
| color=#0000ff>% |
+0.2
|
+0.9
|
-0.1
|
+0.3
|
+1.2
|
| color=#0000ff>Nasdaq |
2020
|
2064
|
2061
|
2075
|
2090
|
| color=#0000ff>% |
+0.3
|
+2.2
|
-0.2
|
+0.7
|
+0.7
|
| color=#0000ff>QQQ |
36.46
|
37.13
|
37.12
|
37.20
|
37.58
|
| color=#0000ff>% |
+0.4
|
+1.8
|
-.03
|
+0.2
|
+1.1
|
| color=#0000ff>NYSE |
|
|
|
|
|
| color=#0000ff>T. VOL |
1.57
|
1.46
|
1.28
|
1.39
|
1.63
|
| color=#0000ff>U. VOL |
915
|
1.25
|
661
|
855
|
1.26
|
| color=#0000ff>D. VOL |
650
|
194
|
610
|
526
|
355
|
| color=#0000ff>VR |
58
|
86
|
52
|
62
|
78
|
| color=#0000ff>4 MA |
49
|
56
|
56
|
64
|
69
|
| color=#0000ff>5 RSI |
40
|
63
|
58
|
65
|
77
|
| color=#0000ff>ADV |
1744
|
2663
|
1846
|
2164
|
2265
|
| color=#0000ff>DEC |
1536
|
671
|
1457
|
1127
|
1021
|
| color=#0000ff>A-D |
+208
|
+1992
|
+389
|
+1037
|
+1244
|
| color=#0000ff>4 MA |
-223
|
+205
|
+280
|
+906
|
+1165
|
| color=#0000ff>SECTORS |
|
|
|
|
|
| color=#0000ff>SMH |
+0.4
|
+4.3
|
-0.9
|
+0.3
|
+1.7
|
| color=#0000ff>BKX |
-0.3
|
+1.6
|
-0.4
|
+.05
|
+1.2
|
| color=#0000ff>XBD |
-0.4
|
+2.4
|
+0.3
|
-0.3
|
+3.9
|
| color=#0000ff>RTH |
+1.2
|
+1.4
|
-0.3
|
+0.7
|
+0.8
|
| color=#0000ff>CYC |
+0.6
|
+2.2
|
+.01
|
+0.6
|
+1.5
|
| color=#0000ff>PPH |
+0.1
|
+0.6
|
-0.8
|
+0.7
|
+0.7
|
| color=#0000ff>OIH |
-1.7
|
+0.9
|
+2.3
|
+2.1
|
+1.0
|
| color=#0000ff>BBH |
-0.4
|
+1.0
|
-0.2
|
+0.8
|
+1.2
|
| color=#0000ff>TLT |
-0.4
|
+1.1
|
+0.3
|
-0.6
|
+0.8
|
| color=#0000ff>XAU |
+1.4
|
+4.8
|
+1.0
|
-0.6
|
+2.9
|
^next^
For Active
Traders
Trading action in the SPX was accelerated with
the buy programs which you can easily see on your five-minute chart. From 9:30
a.m. to 11:00 a.m. ET, pre-Greenspan, the index went nowhere between 1145.35
and 1142.36. At 11:00 a.m., the Greenspan speech sent the SPX to 1152.69 on
just four five-minute bars. It magically stopped trading from 11:35 a.m. to
1:45 p.m. in a Slim Jim between 1152.69 – 1151.26, that is also a key program
reversal time.
It then broke out of the Slim Jim, trading to
1158.89 on the 2:00 p.m. bar (which, by the way, was just another four-bar
move). Price went sideways in a Slim Jim from 2:00 p.m. – 4:00 p.m. between
1158.89 and 1155.67, closing at 1157.76. Net net net, it was 40 minutes of
advancing time vs. a six-and-a-half hour trading day. You can bet there were
significant programs going on.
We will find out really quickly if the
Generals
want to push price to the 1250 – 1260 zone with the .618RT to 1553 at 1254.
The
whole purpose of the long synthetic straddle was a retracement from the
current
retracement zone or a continuation to a higher zone. Sideways consolidation
is
never good for time premium or volatility adjustment. Today’s move is the
fourth
adjustment. So far, so good.
All of the semis from yesterday’s commentary
came
out of those 60-minute chart flags, including
(
LLTC |
Quote |
Chart |
News |
PowerRating) and
(
INTC |
Quote |
Chart |
News |
PowerRating).
(
ADI |
Quote |
Chart |
News |
PowerRating) gave you a trade-through entry above the 49 – 48.50 box, running 1
point to 50. The programs gave extra acceleration to the basics
(
IP |
Quote |
Chart |
News |
PowerRating),
(
AA |
Quote |
Chart |
News |
PowerRating)
and
(
DOW |
Quote |
Chart |
News |
PowerRating).
(
AMGN |
Quote |
Chart |
News |
PowerRating) traded up to 66.05 after entry above 65. The
energy
focus stocks squeezed out another up day with
(
RIG |
Quote |
Chart |
News |
PowerRating) +2.2%,
(
DO |
Quote |
Chart |
News |
PowerRating)
+1.8%,
and
(
NBR |
Quote |
Chart |
News |
PowerRating) +0.8%. The OIHs were +1.0%. I’d stay away from those on any
kind
of breakouts above the previous highs, only decent retracements that set up
would I even look at.
(
GS |
Quote |
Chart |
News |
PowerRating) gapped open above the recent trading range,
but
there was a first consolidation breakout to new intraday highs above 105
which
carried to 107.26, closing at 107.09.
I have included the five-minute chart of DOW,
a
focus stock for various reasons. First, it was in a five-week trading range
above all of its EMAs with a 42.39 high range close. Tuesday’s high was
42.49.
The 52-week high was just above at 42.75. If the tape is right, the highest
probability is that the Generals would break it out, or also the hedge funds
would run it, and that is why I put it on the focus list the past few
days.
We got early entry out of the Flip Top
pre-Greenspan trading above 42.25, and the next hurdles were taken out on
the
acceleration. The 10-day average range for DOW was 1 point, so at 43.51, the
range was 1.56 points. The chart cuts off after the pullback to 42.95, but
DOW
then continued up to 43.70, closing at 43.62, +3.4%. Net net, when managing
a
trade, you must be aware of the stock’s average range when you’re deciding
to
take profits or move up your trailing stops. You run out of range and time
as a
daytrader, and that is why you must be cognizant of the average
range.
Today’s
Action
The Dow Jones, which closed at 10,738, right in
the .786 retracement zone to the 11,750 all-time high in January 2000. That’s
quite a move considering all that has happened in the world. The SPX won’t hit
the .786 zone (if it even does) until 1385. The SPX went deeper in the bear
market because of the technology components when the bubble burst.
On the other hand, because of its dramatic drop
from 5079 to the 1108 October 2002 low, the Nasdaq, which closed at 2090, is
in the .236 retracement zone, which is 2045, having made a previous 2153 high,
so this .236 level has support of sorts the past six weeks. I don’t expect the
Nasdaq to even come close to the retracement made by the Dow, and even the SPX,
at least not in the current market cycle, and maybe not even the next. The Nasdaq
is still in the third wave of what we hope is a five-wave cycle. (See weekly
chart.) But a fourth wave down could be anywhere from -15% to -25%. Right now
it is trading above a 6-displaced 4 EMA of the highs, which is 2056, and a 6-4
EMA of the low, which is down at 1992. There is no trend break until that changes.
On the upside, I don’t see the third wave going much past 2388 without a fourth
wave down, at the least.
On the major indices, if the SPY follows the
SPX
to new highs above 116.50, that is a zone where RSTs and 1,2,3 higher tops
can
form. For the RUT (Russell 2000), which closed at 597, new highs are above
601.50 for those same setups. The QQQ, which closed at 37.58, is -3.6% below
a
new high above 39, and for the Nasdaq, that would mean above
2153.83.
On the 20-day 30-minute chart, 2100 is the .618
retracement to 2153.83 high. On that same 30-minute chart for the SPX, the move
above 1155.38 sets up an RST, and of course, on the daily chart also, and it
doesn’t trigger until there’s a close below the low of the high day, which we
don’t know yet. That is not for a position trade, that is for an intraday trade,
only to be held if there’s a cushion at the end of the day in the proxies. The
SPY is in an RST zone on the 20-day 30-minute chart, but it hasn’t triggered
yet, while the DIA did make a new high on the daily chart.
Have a good trading day,
Kevin Haggerty
P.S. You can finally learn
what traders have been asking me to teach them for years—