Put Your Helmets On And Get Ready To Go
What Wednesday’s Action Tells
You
It was a 2:30 p.m. ET knife down for the major
indices yesterday, as both the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) and Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) made
1,2,3 double tops and the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) a 1,2,3 lower top. The Nasdaq
declined -2.0% from the 2000.92 intraday high to the 1960.25 intraday low and
close. The Dow hit a 9942 high, right at the 10,011 .618 retracement to the
11,750 all-time high from the 7197 October 2002 low and then carved out a 1,2,3
double top and declined almost 100 points to the 9851 intraday low, closing
at 9873, +0.2% on the day. The SPX hit 1074.30, which is right at the 1.0 volatility
band of 1074.33, then also made a 1,2,3 double top before declining to a 1064.63
intraday low and closing at 1064.73, -0.2%. The Nasdaq finished -1.0% on the
day, while the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s at 35.26 was -1.2%.
The wide-range bar for the SPX on Monday making
a new high due to the lack of selling pressure rather than heavy buying by the
Generals proved ominous again today that in spite of the opening gaps, the early
rise wasn’t on a significant increase in volume. The 1,2,3 pattern set up at
almost perfect levels, right at the high end of the SPX confluence (Dec.
1 commentary.) and the major .618 retracement level for the Dow 11,750 all-time
high. Needless to say, you had defined primary 1,2,3 top patterns at great risk/reward
levels.
NYSE volume expanded some to 1.42 billion,
volume
ratio of 44, and breadth -231, as the four-day MA of net advances minus
declines
has dropped to +481 from +1134 on Nov. 28 and +1115 on Dec. 1. Before the
knife
down yesterday, the net advances minus declines on an intraday basis was
about
+850 around 12:30 p.m.
In the major sectors, the
(
SMH |
Quote |
Chart |
News |
PowerRating)s ended at -1.8%,
closing below the last three lows and six closes on a range of 1.4 points, which
is the widest range bar on a down day since Nov. 18. Volume was just a touch
above average. Net net, the bevy of narrow-range dojis was followed by expansion
of range. (See Dec.
3 commentary.)
| size=2> |
Thursday
11/27 |
Friday
11/28 |
Monday
12/1 |
Tuesday
12/2 |
Wednesday
12/3 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
H
|
1060.63
|
1070.47
|
1071.22
|
1074.30
|
| color=#0000ff>Low |
|
1056.77
|
1058.20
|
1065.22
|
1064.63
|
| color=#0000ff>Close |
O
|
1058.20
|
1070.12
|
1066.62
|
1064.73
|
| color=#0000ff>% |
|
-.02
|
+1.1
|
-0.3
|
-0.2
|
| color=#0000ff>Range |
L
|
3.9
|
12.3
|
6
|
9.7
|
| color=#0000ff>% Range |
|
37
|
97
|
23
|
0
|
| color=#0000ff>INDU |
I
|
9782
|
9899
|
9854
|
9873
|
| color=#0000ff>% |
+0.2
|
+1.2
|
-0.5
|
+0.2
|
|
| color=#0000ff>Nasdaq |
D
|
1960
|
1990
|
1980
|
1960
|
| color=#0000ff>% |
+0.4
|
+1.5
|
-0.5
|
-1.00
|
|
| color=#0000ff>QQQ |
A
|
35.34
|
35.90
|
35.69
|
35.26
|
| color=#0000ff>% |
+0.2
|
+1.5
|
-0.6
|
-1.2
|
|
| color=#0000ff>NYSE |
Y
|
||||
| color=#0000ff>T. VOL |
487
|
1.35
|
1.38
|
1.42
|
|
| color=#0000ff>U. VOL |
280
|
1.08
|
585
|
609
|
|
| color=#0000ff>D. VOL |
193
|
246
|
779
|
783
|
|
| color=#0000ff>VR |
59
|
81
|
43
|
44
|
|
| color=#0000ff>4 MA |
72
|
71
|
64
|
57
|
|
| color=#0000ff>5 RSI |
69
|
92
|
70
|
65
|
|
| color=#0000ff>ADV |
1848
|
2417
|
1614
|
1518
|
|
| color=#0000ff>DEC |
1207
|
882
|
1634
|
1749
|
|
| color=#0000ff>A-D |
+641
|
+1535
|
-20
|
-231
|
|
| color=#0000ff>4 MA |
+1134
|
+1115
|
+810
|
+481
|
|
| color=#0000ff>SECTORS | |||||
| color=#0000ff>SMH |
+1.1
|
+0.6
|
-0.7
|
-1.8
|
|
| color=#0000ff>BKX |
-0.1
|
+0.9
|
-0.1
|
-0.4
|
|
| color=#0000ff>XBD |
+0.2
|
+1.2
|
-.08
|
+0.6
|
|
| color=#0000ff>RTH |
+0.3
|
+.06
|
-2.2
|
-0.8
|
|
| color=#0000ff>CYC |
+0.3
|
+1.8
|
-0.4
|
+0.4
|
|
| color=#0000ff>PPH |
-0.5
|
+1.6
|
-0.2
|
+0.5
|
|
| color=#0000ff>OIH |
+.02
|
+0.7
|
+1.2
|
-1.3
|
|
| color=#0000ff>BBH |
+0.2
|
+2.1
|
+0.5
|
-0.4
|
|
| color=#0000ff>TLT |
-0.9
|
-0.5
|
+0.4
|
-0.4
|
|
| color=#0000ff>XAU |
+1.8
|
+2.3
|
+.07
|
-.07
|
For Active Traders
I have included five-minute charts of both
the
Nasdaq and
(
DIA |
Quote |
Chart |
News |
PowerRating)s pointing out the 1,2,3 reversal patterns which many of
you
have learned from the 1,2,3 module. However, prior to the 1,2,3 tops, we had
a
First-Hour module opportunity with a 50% gap pullback setup, which you see
on
the DIA chart. It’s the same on the Nasdaq, I just didn’t label
it.
Starting with the DIA chart, there was a gap
up
opening trading up to 99.35, then the contra move, which was a 50% gap
pullback,
which was also to the 60-period EMA, and it was the exact .618 retracement
to
the last swing point low on Tuesday at 98.60 which was the 4:00 p.m. bar.
From
there, it resumed the direction of the opening, and it was a nice ride to
99.59,
the intraday high. The 1.618 Fib extension of the 99.35 leg down to 98.89 is
99.63, so once again, almost to the number. From there it was sideways, made
the
1,2,3 double tops, then a knife down from 2:30 p.m. into the
close.
As I mentioned before, in addition to the sequence
I just explained, 10,011 is the .618 retracement to the all-time 11,750 high,
and yesterday’s intraday Dow high was 9942, so when you got to that 99.59 high
and also the 1.618 Fib extension, you had more sequence than you needed. Also,
at that high on the DIAs, the SPX made a 1074.30 intraday high vs. its 1.0 volatility
band of 1074.33. All of the numbers in the sequence are almost at exact levels,
which happens often, but we just need a zone around the level and a reversal
pattern to take advantage. It’s not about some exact number.
If you have Trading
With The Generals III, everything involved in yesterday’s trades was in
it. If you have the 1,2,3
and First
Hour modules, you were just fine, but didn’t have the sequence confirmation
taught in TGIII. Either way, it was a great day for daytraders.
If you also look at the five-minute Dow
chart,
then the DIA chart from yesterday, you see a small negative divergence by
the
DIAs at the 1,2,3 double top. Looking at the Nasdaq chart, you can see the
gap
pullback setup that again took out the previous day’s 1996.04 high, trading
up
to 2000.92. After breaking TL1 and TL2, it formed a 1,2,3 lower top at
1996.05,
unable to surpass the 1996.04 high again as it stalled at the TL2 extended.
Trend entry was below 1991.19, which put it below the 8, 20 and 60 EMAs,
trading
down to a 1961.56 intraday low.
You might also say that the Slim
Jim module came into play yesterday as the DIA traded between 99.59 – 99.35.
It was a loose one, but it gave you the same entry as the 1,2,3 double top entry
did. It also helps the sequence when the market came in short-term overbought
into the key major retracement levels and other confluence. Looking at Dec.
1 on the table, you see that the four-day MA of the volume ratio was 71, five-day
RSI 92, and four-day MA of breadth was +1115. It’s like counting cards in blackjack,
you bet when the numbers are in your favor.
Today’s
Action
That was yesterday, and it’s now history, so
starting out today, yesterday’s afternoon decline left the DIAs in a
nine-bar
closing range between 99 – 98.85 (five-minute chart), which is also at the
240
EMA. Know your Fib levels between 99.59 – 96.12. The secondary .618
retracement
to 98.59 is 98.92 and the DIAs closed at 98.95. On five-minute charts, I
don’t
care much for the minor Fib levels, except if it adds to a confluence level.
Other than that, it’s just noise.
The SPX by trading below Tuesday’s 1065.22
low is
now setting up in an RST pattern (five-minute charts) by closing at 1064.73.
The
.236 retracement to the 1031.20 last significant low is 1064.13 and the. 382
level is 1057.83. Put your helmets on and get ready to go.
Have a good trading day,
Kevin Haggerty
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