Range Resolution
After
a four-bar opening decline to an intraday low of 877,
the SPX gave you a Trap Door entry above
879.11 that ran to 888.13 in three bars before retracing to 879.21. It then
started to advance. There was a pattern development from 12:00 p.m. to 2:30 p.m.
ET between 890 and 884 which is the .618 retracement to 965 and the .50
retracement to the 1982 low. This range was broken to the upside at the 2:30
program time, and the SPX ran to 898 into the close.
Unless there is overt war
news and not some Mickey Mouse “miss by” or “beat by” a penny on some reduced
estimate, it appears the Generals will try to hold most of October’s gains into
the fiscal year-end for some of the largest funds. This sets up the kind of
program games you saw on Friday at 2:30. The Program Gang will initiate the side
they think is the easiest to accomplish legging into a trade. The large hedge
funds have the capital to do the same thing.
Since Oct. 18, the SPX
has been locked in a 3.5% range between 904 and 873 with lots of inane babble by
the media and analysts that creates the volatility within that range. For
example, the SPX has traded from 873 to 901, down to 874, back up to 904, down
to 877, and up to the 897.40 close on Friday. I mentioned in
Friday’s commentary that the range would be resolved shortly, and with the
early green futures this morning, we should see the upside attempt today.
All of the major sectors
advanced Friday, led by the SOX +5.0%. Our good friend
Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) which closed at 16.50 on Oct. 15, only to get
trashed the next day to 13.42 as the media ignited the hysteria, has now risen
on higher lows and highs to 16.66, closing Friday at 16.32. If you track many of
these kinds of situations like I do, the more you will feel comfortable playing
some of the overreactions. I see Citigroup
(
C |
Quote |
Chart |
News |
PowerRating) is trading up to 37 after the trash to 24.
^next^
With the funds in a
holding pattern through month’s end, it doesn’t take much volume to move the
major indices as we saw on Friday. NYSE volume was 1.3 billion, the lightest of
the week, as the NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) gained +3.2%, the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +2.5%, the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) +1.7%, and the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating)
+1.5%. The volume ratio was good at 72, and breadth positive at +1200.
The SPX gets some
daylight if it can clear the .707 retracement to 965 of 907, the 89-day EMA at
904, and an intermediate standard deviation band at 906. The .786 retracment to
965 is 923, while there is a 2.0 band at 935 and a 3.0 volatility band at 965.
That 900 – 907 range has already kept the index in the 904 – 873 range since
Oct. 18, so it will certainly accelerate some action on the range breakout.
Month-end gains should override the short-term overbought condition for the next
few days.
Have a good trading day.
Five-minute chart of
Friday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Friday’s NYSE TICKS