Remember This Key Point Regarding Volatility Bands
The
major indices did well yesterday coming off that ugly Monday.
NYSE volume was 1.3 billion, a volume
ratio of 83, and breadth +1389 for a one-day yo-yo turnaround. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was +1.5%, the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) +1.2%, and the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) +0.8%. All of the major sectors were green, led by the biotechs at
+2.7% and the drugs +2.2%.
The major indices started
a rally just before 10:30 a.m. ET. The Dow gave us an RST pattern with the
signal bar being the 10:20 a.m. hammer. Entry was above 8195.70 and it ran up to
an intraday high of 8338, but then faded to close at 8280. The SPX had a
positive divergence from the Dow with a higher low of 863.10 on the 10:20 a.m.
bar vs. the 862.59 low on the 9:40 a.m. bar, which held the previous day’s 862
low. The 860 – 862 level again provided opportunity. You should be predisposed
to take any setups from key levels.
The move through 870 on
the SPX carried about 10 points to the 879.87 intraday high. You were ready for
that second entry trade through the 870 neckline. (See yesterday’s commentary.)
The SPX closed at 874.74, so 870 might come into play either way early today.
The early futures are flat to slightly green.
My immediate upside
awareness levels are 884, which is the .50 retracement between the 1553 all-time
high and the 1987 low. The other is today’s 886.96 1.0 volatility band. The 1.0
volatility band for the downside is 862.52, which is right in our key zone. FYI:
Most of you think if an index or stock isn’t at the 1.5 to 2.0 volatility band,
you don’t get involved. But to the contrary, far more trades come from that 1.0
volatility band zone, i.e., currently a 1.0 volatility band for the SPX has been
between 12 and 14 points, and this move usually coincides with some retracement
level. Stay on top of that.
There’s a lot going on
just above from the down trendline after the Dec. 2, 2002, high which comes in
just above 900, then the 200-day EMA above that, then the inverse
head-and-shoulder neckline at 920 – 925. Do you have a plan?
Have a good trading day.
Five-minute chart of
Tuesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Tuesday’s NYSE TICKS