Seven Come Eleven
At the
bell yesterday, the Dow was
down 0.8% and -2.7% over the past five days. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) ended -0.7%
and -2.3% over the same period. The NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) finished with a
positive divergence at +1.2% for the day, but still -4.1% for the past five
days. The stocks that have declined the most in this bear market are the ones
that stayed green yesterday, so you must assume there is still some short
covering. The dogs remain green in spite of the negative market dynamics
yesterday.Â
NYSE volume dropped off
some to 1.3 billion, a volume ratio of just 29 and breadth at -897. The tech
divergence is evident when you see the Nasdaq traded 1.8 billion shares, which
is about average, but with a slightly positive volume ratio of 57. The NDX is
where the positive divergence really stands out with a very positive volume
ratio of 72. I then look at the
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) and see it was down -2.5%, but I
also see that the
(
$NWX.X |
Quote |
Chart |
News |
PowerRating), which is the networking index, was +1.1%, the
(
$IIX.X |
Quote |
Chart |
News |
PowerRating), the Internet index, was +1.7%, and the computer software index
+1.9%. Those three indexes contain most of the decimated stocks of this bear
market.
I see it as the Generals
replacing stock that they blew out for cosmetic purposes at quarter end, lots of
short covering, in addition to the perception that the worst is almost over for
some of these beaten up companies, and some new money was thrown at them, as
most were teenagers. It also came at a key cycle period and an extremely
oversold condition. The Generals can afford to be early because of their deep
pockets and can buy more at lower prices. The only real decision for the
institutions are which companies will remain in business and don’t have debt
problems. Yes, many of these dogs will hunt again over the next two years.
I have listed the
downside alert levels for any retest of the “V” bottom, and they, of
course, will change if we have a higher high to this rally. Retest or lower low,
you have no clue until we see where the Generals return in size.
There is no divine
strategy on Expiration Friday, which has been mostly down in this market, but
you do want to take some more scalp trades and keep tight stops. The Dow has
declined 221 points and the SPX 30 points over the past two days, so I suspect
we will have some contra-trend action today. We all certainly know where
yesterday’s lows are for continuation shorts, with second entry the preferred
strategy.
Stocks
Today
The green stocks in the
NDX 100 that had the significant volume yesterday and also closed in the top
25%-30% of their range are
(
CHKP |
Quote |
Chart |
News |
PowerRating),
(
JNPR |
Quote |
Chart |
News |
PowerRating),
(
CIEN |
Quote |
Chart |
News |
PowerRating),
(
MERQ |
Quote |
Chart |
News |
PowerRating),
(
RFMD |
Quote |
Chart |
News |
PowerRating),
(
QLGC |
Quote |
Chart |
News |
PowerRating) and
(
BRCM |
Quote |
Chart |
News |
PowerRating). Keep this group of seven on your
screen and keep scrolling because you will get some good setups, long or short.
The game has players active in these stocks. To this list, I would add because
of their recent volatility
(
NVDA |
Quote |
Chart |
News |
PowerRating),
(
VRSN |
Quote |
Chart |
News |
PowerRating),
(
TER |
Quote |
Chart |
News |
PowerRating) and
(
SEBL |
Quote |
Chart |
News |
PowerRating).
You now have a “seven come eleven” list to work with today that will
provide opportunity. On Monday I will count the number of clearly defined setups
that these stocks provided today. Even if we get a dull sideways Expiration
Friday, you won’t be shut out.
Have a good trading day
and a better weekend.
Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Thursday’s NYSE TICKS
Do you have a
follow-up question about something in this column or other questions about
trading stocks, futures, options or funds? Let our expert contributors provide
answers in the TradingMarkets Trading Advisor! E-mail your question to questions@tradingmarkets.com.
For the latest answers to subscriber questions, check out the Q&A section,
linked at the bottom-right section of the TradingMarkets.com home page.