Reaction Day. Here’s How To Play It
What Thursday’s Action Tells
You
The market action was certainly concentrated
by
the Generals in a smaller universe of stocks yesterday. This was evident by
the
SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) and Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) on the plus side until just before
1:00 p.m. ET with TRIN remaining below .70. The up volume/down volume ratio
was
only slightly better than 1.1:1, yet breadth was negative right from the
opening
bell and finished at -807. NYSE volume matched Wednesday at 1.77 billion
shares,
but this time the volume ratio was 41, not 79. It was a fairly narrow-range
day
for the SPX, 8.1 points, and no real selling as the intraday low was 1186.66
and
high at 1194.81. The SPX closed down about a point to 1190.33, the Dow
closed
down just 5 points to 10,585, with both the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating), 2144,
+0.2%,
and
(
QQQQ |
Quote |
Chart |
News |
PowerRating) +0.4% to 40.07.
The only sectors green were the PPH, +1.3%,
and
BBH, +2.4%. Oil declined again, and the
(
OIH |
Quote |
Chart |
News |
PowerRating) was -2.4%, but some volume
did
come in below 80. The OIH volume increased to 6.6 million shares vs. 4.4
million
shares on Wednesday’s -4.0% decline as the herd gets frothy. That was the
most
volume since the 8.8 million shares on 10/24 as the OIH was declining to the
89-day EMA on another lower-oil-price flap. This drop is certainly more
overt
which will set up a better upside reflex for traders. I have a Brooklyn
Bridge
you can buy if you think we are going to Neverland with $25 oil anytime
soon.
The 200-/233-day EMAs are 74.25/73.20 with the 89-day EMA at 78.92 and minor
support at 76 – 76.50. Price must trade below 76.67 to set up any
RST.
The rest of the primary sectors were all off
small, while the short bond position from the
(
TLT |
Quote |
Chart |
News |
PowerRating)‘s artificial rally
above
88.50 on 11/23 remains in the money with the TLT closing yesterday at 86.10.
This was the second day closing below its 200-day EMA, and the
head-and-shoulder
price objective measures down to about 83.75. Yesterday’s TLT volume of 2.9
million shares was the most since the 4.0 million and 3.2 million shares as
a
bottom was being made last May at 80.51. The .618 retracement to that low is
84.17. You had ample pre-warning on this trade setup into the right shoulder
high of 89.20. (See your daily chart.)
For Active
Traders
The day was very profitable with the trading
plan
prescribed. The
(
SMH |
Quote |
Chart |
News |
PowerRating) broke out of a First Consolidation pattern to New
Intraday Highs above 33.82, which was also a re-cross of the 200-day EMA at
33.81 and above the previous day’s high of 33.76. Price ran to 34.33 before
the
first reversal-bar exit below 34.27. 34.33 was 3.9 times risk of .13. The
SMH
declined along with the major indices in the afternoon to 33.50 and closed
there.
The other anticipated trade was the SPX
1191 –
1195 minor resistance zone. For the
(
SPY |
Quote |
Chart |
News |
PowerRating), there was daily chart
sequence at
119.64, 119.68 and 120. On yesterday’s five-minute chart, 119.64 was also
the
extension of the previous leg down from 119.50 to yesterday’s 119 low. The
1.618
extension of that same leg was 119.81. The first entry was after the SPY hit
119.74 and traded below its 119.65 low. This went to 119.56 and reversed,
making
new intraday highs to 119.87. The loss was small on that first entry, less
than
.10. The low of the 119.87 doji bar high was 119.76, and that was the next
entry, which was excellent, trading down to 119.11. Net net, you had daily
chart
and five-minute chart confluence, so it was an anticipated level of entry.
Also,
price was better during the morning than the dynamics, and all the more
reason
to take the short entries.
In the focus stocks,
(
YHOO |
Quote |
Chart |
News |
PowerRating) broke out of
a
contracted volatility pattern to new closing highs, +3.0% on the
day.
Today’s
Action
There is nothing cerebral to say other than
it is
a reaction day. The pre-market futures are green as of 7:45 a.m., as I
record
this. The S&Ps are +5.40, Dow +36 and Nasdaq +13.50. Oil is down, while
(
INTC |
Quote |
Chart |
News |
PowerRating) traded up sharply after the close yesterday following their
guidance
call. Needless to say, the CNBC media is all over the hype, as usual. At
8:30
a.m. today we have the first-Friday-of-the-month “jobs dance,'”
but that is
often good for an acceleration and then a contra move. Let the emotion play
out
a bit before you enter any contra move.
Have a good trading day,
Kevin Haggerty
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