Price Action Zone
I left for vacation on
4/8 with the SPX intraday high of 1149 and last Tuesday it made an
1147 high before a 3-day decline of -2.8% into Friday’s 1107.30 close,
which is -3% on the week and below last year’s 1111.92 close. There has been
quite a bit of economic and geopolitical news over the past few weeks, with an
increase in price volatility. Certainly that will continue, especially the
geopolitical. I see that the media was at its usual incompetent best when
Greenspan’s rate noise sent the major indices down and the media said “stocks
are down due to interest rate fears,” ignoring better-than-expected earnings.
They then used the flip-side of that cliche two days later when the SPX advanced
+1.4% and they of course said that stocks advanced on better-than-expected
earnings, ignoring interest rate fears. Reminds me of the race track tout
that gives 8 different people the expected winner in an 8-horse race.
It was a very tough week for the Nasdaq, -6.4%,
closing at 1920 and the QQQ, -6.6%, finishing the week at 34.77. The previous
initial decline to the 200-day EMA level with a 34 low and -12.8% from 39 gave
us an excellent trade which ran +10.3% to 37.50 and the current 1,2,3 lower top.
37.53 is the .707 retracement to the 39 bull market high. The first decline to a
rising 200-day EMA after new rally highs should always be played, as we did, but
because of the 1,2,3 lower top, circumstances are different as the 34 low can
now be taken out as the parallel line pattern (AB=CD) plays out, in addition to
a next-level retracement to the 19.76 10/02 low. The .236 retracement level is
34.46 and the rally to 37.50 ensued from the 34 low on a re-cross of a rising
200-day EMA, at that time around 34.20. The next zone is the .382 retracement at
31.65, with the AB=CD level at 32.50. Friday’s 34.77 close was right at the
34.71 200-day EMA and that is the daytrader’s early focal point on Monday. The
5-day RSI is 19.48, which takes it into the short-term oversold zone, but I
expect that to get more oversold this week. The SPX has failed at the 1150-1161
resistance for three months so far and has yet to retrace to its 200-day EMA
which is now 1078.10 and was about 1065 when the SPX made the 1087 low on 3/24,
coming off a positive divergence in the 5-day RSI from 1162 to 23.60 at SPX 1087.
It went out at 22.39 on Friday with the 1107 close, so it has further to go to
entice this corner into anything more than a day trade. The rising 200-day EMA
is 1078.10 with the AB=CD level at 1075 and the 12-month EMA now at 1065. Adding
to this confluence is the .236 retracement to 969, which is 1070, and the .236
retracement to 789, which is 1075. Also, for all of you Sequence
Traders/investors, 1072 is the .382 retracement to the 1990 low of 295 from the
all-time high of 1553.
| Â | Monday 4/26 Â |
Tuesday
4/27 |
Wednesday
4/28 |
Thursday
4/29 |
Friday
4/30 |
Net |
Index |
||||||
| SPX Â |
||||||
High |
1145.08 | 1146.78 | 1138.11 | 1128.61 | 1119.26 | 1146.78 |
Low |
1132.91 | 1135.53 | 1121.70 | 1108.07 | 1107.23 | 1107.23 |
Close |
1135.53 | 1138.11 | 1122.41 | 1113.88 | 1107.30 | 1107.30 |
%Â |
-0.4 | +0.2 | -1.4 | -0.8 | -0.6 | -3.0 |
Range |
12.2 | 11.3 | 16.4 | 20.5 | 12.0 | 39.5 |
% Range |
21 | 23 | 4 | 28 | 0 | 0 |
INDUÂ |
10445 | 10478 | 10343 | 10272 | 10226 | |
%Â |
-0.3 | +0.3 | -1.3 | -0.7 | -0.5 | -2.5 |
Nasdaq  |
2037 | 2032 | 1990 | 1959 | 1920 | |
%Â |
-0.6 | -0.2 | -2.1 | -1.5 | -2.0 | -6.4 |
| QQQÂ |
36.94 | 36.87 | 36.22 | 35.64 | 34.77 | |
%Â |
-0.7 | -0.2 | -1.8 | -1.5 | -2.4 | -6.6 |
NYSEÂ |
||||||
T. VOLÂ |
1.29 | 1.52 | 1.86 | 1.86 | 1.63 | 1.63 |
U. VOLÂ |
450 | 767 | 247 | 405 | 468 | 467 |
D. VOLÂ |
811 | 728 | 1.6 | 1.4 | 1.14 | 1.14 |
VRÂ |
35 | 51 | 13 | 22 | 29 | |
4 MAÂ |
55 | 52 | 35 | 30 | 29 | |
5 RSIÂ |
53 | 57 | 34 | 27 | 22 | |
ADVÂ |
1223 | 1841 | 784 | 869 | 1354 | 1214 |
DECÂ |
2084 | 1461 | 2524 | 2444 | 1909 | 2084 |
A-DÂ |
-861 | +380 | -1740 | -1575 | -555 | -4351 |
4 MAÂ |
-107 | +41 | -810 | -949 | -872 | |
SECTORSÂ |
||||||
SMHÂ |
-2.3 | -1.2. | -1.5 | -2.6 | -1.7 | -9.3 |
| BKXÂ |
-0.2 | +0.3 | -1.5 | -0.3 | -.07 | -1.8 |
XBDÂ |
+0.2 | +.01 | -2.3 | -1.4 | -1.4 | -4.9 |
RTHÂ |
-1.0 | +1.0 | -0.9 | -1.0 | -0.6 | -2.5 |
CYCÂ |
-0.7 | -.04 | -2.3 | -1.9 | -0.5 | -5.8 |
PPHÂ |
-0.1 | +0.5 | -0.5 | -0.7 | +.03 | -0.8 |
OIHÂ |
+0.4 | +3.4 | -2.0 | -3.4 | -0.2 | -1.8 |
| BBHÂ |
+4.4 | -0.9 | -1.9 | -1.6 | -0.3 | -0.3 |
TLTÂ |
+0.2 | +0.4 | -0.9 | -0.5 | +0.4 | -0.4 |
| XAUÂ |
+0.5 | -1.2 | -7.1 | +1.0 | -0.2 | -7.0 |
^next^
I mentioned to you before I left on vacation that
the first week in May is a key time zone. May 5 is the .618 time retracement of
the 3/24/00 2000 SPX high and the 10/10/02 769 low (trading days) and that is
why I said this first week is a key time period. A further SPX decline to the
1078-1065 confluence zone this week is a key sequence that will provide
opportunity. 1107.30 is a new low weekly close since the 1108.06 close the week
of 3/22, so a quick down side air pocket of -2.7% takes us into that zone, so be
watching that price action carefully for opportunity.
The SMHs have led the major indices down, declining -23% from the 45.78 rally
high to a 35.23 intraday low on Friday, closing at 35.30. The .382 retracement
to the 17.32 10/02 low is 34.91; the 5-day RSI is 12.96, the most short-term
oversold since the rally off the 38.41 low and 89-day EMA zone to the 45.78 bull
market high. Net net, +164% up and -23% retracement so far. The SMH is a primary
focus right here in the 35.45 – 34.90 zone and a bit lower if that happens,
because 35.45 is the 1.272 extension of the last leg up from 36.85 – 41.97 and
35.30 is in the 2.0 standard deviation zone of the 3-month regression channel.
The RST buy pattern is also setting up, and those of you who know the rules are
ready to play it intraday and then maybe a short-term position if it holds the
intraday entry on a close above the high of the low day, wherever that proves to
be.
Another key group to watch this week for possible is the brokers
(
XBD |
Quote |
Chart |
News |
PowerRating),
which hit a 127.49 intraday low on Friday, closing at 128.45. The rising 200-day
EMA is 128.11 and the 5 RSI is 16.08. The XBD has declined -14.6% from its
149.24 rally high and this is the first retracement to its 200-day EMA since the
3/03 retracement low. 128.89 is the 1.272 extension of the last leg up and right
at the .236 retracement to the 10/02 low. Once you see that the group index is
at a price action zone you of course look at the individual stocks and see how
they set up. One example is GS that closed at 96.75 off a 96.31 intraday low on
Friday. The 200-day EMA is 96.16 and the AB=CD level is 96.60. MER tells a
different story, having closed at 54.23 on Friday, below its 200-day EMA of
55.98, with the .38 retracement to the 10/02 low at 51. I wouldn’t play this
from any short-term position unless it either re-crosses its 200-day EMA on
volume or sets up around the .382 zone. MWD is similar to MER, closing at 51.39
vs. its 200-day EMA at 54.31.and the .382 retracement to the 10/02 low around
the 50 level where it broke out of the ascending triangle above all of its daily
chart EMAs. LEH is also below its 200-day EMA
of 76.04, closing at 73.40 on Friday with the .382 retracement zone at 72. BSC is
similar to the GS pattern, closing at 80.14Â vs. the 79.15 200-day EMA. The
AB=CD level is 80.67. Because of the volatility, semiconductors and brokerage
stocks offer traders excellent opportunities both ways when they are in key price
zones such as now.
The week starts today with the 4 MA of the volume
ratio at 29, 10 MA at 40, breadth -872 and the 5-day RSI at 22. These are
short-term O/S numbers after the decline last week but I see that the futures
are small green at 7:30 AM ET, and from a position standpoint, I need more
downside to that SP 10787-1065 zone. On a daytrading basis there is no
hesitation on taking long trades if they set up today.
Have a good trading day,
Kevin Haggerty