Possible Short-Term Reflex Levels On These Stocks
What Friday’s Action Tells You
Friday was flat for the SPX, closing the week at
10988.67, +0.9%. The range for the week was 23 points, or 2.1%, which is about
the norm (FYI the table has been corrected to show the weekly range in the “Net”
column and the percentage that price closes within that weekly range. It has
been that way for the past three weeks, so you can make the change in the previous
weekly tables if you need to). The Dow outperformed the SPX by the most I have
seen in a while at +2.3%,closing at 10278 on Friday, +0.3%,led by the cyclical
and industrial stocks. Technology continued to lag as the Nasdaq was +0.1% for
the week while the QQQs were +1.4% as there will be 8 stocks dropped from the
NDX 100 and 8 new ones added as of today, Dec 22, so that accounted for much
of the price increase as allocations were adjusted. Those stocks are posted
on the Nasdaq website.
Friday was another narrow-range day of 6.9 points for the SPX while most of
the option expiration activity got done on Thursday. For the week, the up vol/down
volume ratio was a push at 610 million each, but breadth ended the week positive.
The short term cycle obviously has rolled up, with the 4-day moving average
of the volume ratio at 64, and the breadth moving average +733 and 5-day RSI
at 77.74. There are 10 of 20 major indices
and major sectors with with 5-day RSIs above 70 and only 2 below 50, which
are the SMHs and XLP (consumer staples). There are 5 above 80, which are the
Diamonds, XLI (industrial SPDR), BBH, XBD and XLE (energy SPDR).
| size=2> |
Monday
12/15 |
Tuesday
12/16 |
Wednesday
12/17 |
Thursday
12/18 |
Friday
12/19 |
Net
|
| color=#0000ff>Index | ||||||
| color=#0000ff>SPX | ||||||
| color=#0000ff>High |
1082.79
|
1075.94
|
1076.54
|
1089.50
|
1091.06
|
1091.06
|
| color=#0000ff>Low |
1068
|
1068.04
|
1071.14
|
1076.48
|
1084.19
|
1068.04
|
| color=#0000ff>Close |
1068.04
|
1075.13
|
1076.48
|
1089.17
|
1088.67
|
1088.67
|
| color=#0000ff>% |
-0.6
|
+0.7
|
+0.1
|
+1.2
|
-.05
|
+0.9
|
| color=#0000ff>Range |
14.8
|
7.9
|
5.4
|
13.02
|
6.9
|
23.02
|
| color=#0000ff>% Range |
0
|
90
|
99
|
97
|
65
|
90
|
| color=#0000ff>INDU |
10023
|
10130
|
10145
|
10248
|
10278
|
|
| color=#0000ff>% |
-0.2
|
+1.1
|
+0.1
|
+1.0
|
+0.3
|
+2.3
|
| color=#0000ff>Nasdaq |
1918
|
1924
|
1921
|
1956
|
1951
|
|
| color=#0000ff>% |
-1.6
|
+0.3
|
-0.1
|
+1.8
|
-0.3
|
+0.1
|
| color=#0000ff>QQQ |
34.74
|
34.87
|
34.88
|
35.57
|
35.45
|
|
| color=#0000ff>% |
-1.4
|
+0.3
|
+0.9
|
+1.9
|
-0.3
|
+1.4
|
| color=#0000ff>NYSE | ||||||
| color=#0000ff>T. VOL |
1.46
|
1.51
|
1.41
|
1.56
|
1.59
|
1.51
|
| color=#0000ff>U. VOL |
516
|
925
|
752
|
1.33
|
797
|
610
|
| color=#0000ff>D. VOL |
928
|
557
|
598
|
209
|
756
|
610
|
| color=#0000ff>VR |
36
|
62
|
56
|
86
|
51
|
|
| color=#0000ff>4 MA |
56
|
62
|
54
|
60
|
64
|
|
| color=#0000ff>5 RSI |
56
|
64
|
66
|
78
|
77
|
|
| color=#0000ff>ADV |
1278
|
1947
|
1924
|
2445
|
1682
|
1855
|
| color=#0000ff>DEC |
2018
|
1359
|
1302
|
829
|
1574
|
1316
|
| color=#0000ff>A-D |
-740
|
+588
|
+622
|
+1616
|
+108
|
+2194
|
| color=#0000ff>4 MA |
+301
|
+635
|
+370
|
+521
|
+733
|
|
| color=#0000ff>SECTORS | ||||||
| color=#0000ff>SMH |
-3.1
|
-0.6
|
-0.9
|
+3.6
|
-0.7
|
-2.2
|
| color=#0000ff>BKX |
-0.6
|
+1.0
|
-0.2
|
+1.0
|
+0.4
|
+1.6
|
| color=#0000ff>XBD |
-1.1
|
+1.0
|
+0.5
|
+1.0
|
-0.6
|
+0.9
|
| color=#0000ff>RTH |
-1.8
|
+0.2
|
+1.7
|
+0.8
|
-0.2
|
+0.7
|
| color=#0000ff>CYC |
-0.6
|
+0.6
|
+0.6
|
+1.8
|
+0.3
|
+2.7
|
| color=#0000ff>PPH |
-0.7
|
+0.5
|
-0.3
|
+1.0
|
-.06
|
-0.1
|
| color=#0000ff>OIH |
-1.8
|
+0.8
|
-0.3
|
+4.6
|
-0.8
|
+2.5
|
| color=#0000ff>BBH |
+0.1
|
+0.5
|
+1.7
|
+0.5
|
+0.4
|
+3.2
|
| color=#0000ff>TLT |
-0.6
|
+0.5
|
+0.7
|
+0.9
|
-.03
|
+1.2
|
| color=#0000ff>XAU |
+1.1
|
-2.9
|
+1.3
|
-0.7
|
-2.7
|
-3.9
|
For Active Traders
Make no mistake, the market is very extended in
many areas. My proprietary institutional composite of major indices and sectors
which is comprised of various values, is stretching the rubber band with year-end
and maybe new monies in early January about the only thing holding it from a
retracement to digest all the recent gains. Some of those index and sector values
as of Friday have the DIA, XLI, BBH, XLE, and XLB in the top five extended and
the IWM (Russell 2000), COMPQ, XLK, RTH in the bottom five.
It’s not just price that matters in my composite
because market leaders can be in the top price gainers but working off the
volatility and momentum in a sideways pattern. When the angle of ascent is
extreme in conjunction with price and some of my other values that I use, then
it will move to the higher end of my composite. On the bottom end, it can be an
index or sector that has had some of the strongest price gains but is in a
retracement in a very strong primary trend. The top and bottom ends of my
composite tend to be at the three to six month 2.0 standard deviation bands or
higher in conjunction with other sequence filters I use.
This is where we identify some good risk/reward
setups for a short term trade, enabling you to compound multiple moves for returns
which also reduces market exposure relative to time and position. Once we select
a sector from the composite we often will trade a small basket of stocks in
that sector, which is a better risk/reward than trading individual stocks. The
composite helps identify levels to either take profits, terminate a trade, or
make a reversal trade that has a high risk/reward because it’s taken at the
lowest common denominator in an extended stock and also utilizing a very tight
stop. One example right now is the SMH, which hit the lower band of its 6-month
regression channel the other day and reversed it in that 38.50 -39.10 zone I
made you aware of with the other confluences. Well, it was also the bottom of
my composite and then made a 6% reflex from that level. In the Semis, stocks
like MXIM, AMAT, LLTC and INTC are at possible short-term reflex levels and
these stocks are all both in the SMH and QQQs. These stocks will be watched
closely this week for early indication of a move in either direction.
Friday didn’t have great travel range for S&P
traders, but there was opportunity. The SPY opened down, giving you a Trap
Door setup with entry above 108.98. The contra move, as you can see on
the chart, was a price rise on extremely low volume while all of the major sectors
remained red and there was no real improvement in the up volume/down volume
ratio. 109.37 was the .618 retracement to the previous day’s 109.72 high and
there was also a Kings
and Queens reversal pattern below 109.22 and a good spot to close out the
initial long and reverse the trade to the short side. Below
109.22 put price below the 8, 20, and 60 EMAs. The SPY traded down to 108.59
and went sideways until the move up to 109.12 on the 4:05 PM bar (not shown
on chart).
It’s a major holiday week and the trading will reflect that so don’t expect
any major moves in the absence of any overt news. I prefer to trade only the
strongest setups this week, or not at all.
Have a good trading day
Kevin Haggerty
