Shallow Into Year-End
Yesterday
we had a news air pocket primarily in the tech sector, as
the SPX
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$SPX.X |
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p.m. into the close after reversing the 1125.51 swing-point low and the 1125
50-day EMA. That didn’t preclude us from taking the early upside reversal of
1125.51 after the initial gap-down opening which had the SPX at 1122.96 on the
second five-minute bar. A 1 2 3 higher-low setup gave you the upside trade
through, as the SPX ran to 1131.39 for a decent futures trade. There were many
1.5 to 2.0 volatility band trades because of the emotional down, and I was happy
to hear from so many of you that covered the full service price with your V-Band
trades yesterday.
The positive was some
money being put to work in the biotechs which gave us good trades in
(
GILD |
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(
ENZN |
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(
BBH |
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(
$NDX.X |
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of course, tanked by -9.6%, and the SOX
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$SOX.X |
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-6.8%. NYSE volume was about the
same as the previous day at 1.4 billion shares. The volume ratio dropped to 30
from 42, and negative breadth increased to -982.
The SPX closed at 1119.38
vs. the 1110 top of a four-week trading-range breakout. The .24 retracement to
the September low is 1119.61, and the .38 retracement is 1086.19. There should
be absolutely no surprise at this pullback from the very key alert zones, and at
which point, you had heard the "pump the market" crowd telling you,
"Don’t fight the tape," etc. The TV paraded one after another with the
same party line. I remain the same, as I said before, fully hedged into the key
alert zones because it is a rally in a bear market, and we had no retest of the
"V" bottom, which we will have. Show me one "V" that has
ever stood up. So, I prefer to go with the highest probability.
I continue to think this
quick pullback will be very shallow, and the Generals will mark up many of their
rally high-flyers into year-end. I think the semis and biotechs should be your
main focus, along with big-cap stocks like
(
IBM |
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(
MMM |
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MSFT |
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(
INTC |
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PowerRating) which are over all of their moving averages having rallied strongly
off their September lows and are core positions for the Generals.
For most of the Generals,
the current portfolio weighting is techs, financials and healthcare, which
includes the biotechs, and that’s where any mark up will come from. There is
also a confluence of pivot/minor-cycle dates Dec. 17, 18 and 19, which is next
Monday through Wednesday. Unless we have an inversion with the "V"
bottom being retested into year-end, and I attach a low probability to that,
then I think that this retest will come in the latter part of January through
February time zone.
Stocks
Today
Daily chart setups not
really the theme of the day, so you’re working off the intraday charts, in the
semis especially. Semis I would focus on today based on yesterday’s decline are
(
AMAT |
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(
KLAC |
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only about 5% more than their 30-day average volume. Also,
(
BRCM |
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MXIM |
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NVLS |
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MU |
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BRKS |
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In the biotechs, which do
set up on the daily charts, I’d look at
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ICOS |
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GILD |
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CEPH |
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and
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CELG |
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In the energies,
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SLB |
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(
NBR |
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(
RIG |
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Other stocks:
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TCH |
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(
UNH |
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COST |
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STJ |
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(
SLM |
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as your pivot.
In the banks, two widely
held institutional banks are
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C |
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BAC |
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50-day EMAs, so if you get any kind of intraday play there, play it from the
long side.
And also the big-cap
stocks I had mentioned in the earlier text.
Have a good trading day,
and don’t go out short over the weekend.
Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Thursday’s NYSE TICKS
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