That’s Why They Call It Trading

• June 3, 2004
• Kevin Haggerty

What Wednesday’s Action Tells
You

The volume decline with rising prices
continue,
as the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) made another current rally high of 1128.19,
closing
at 1125, +0.3%. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was +0.6% at 10,263 and has lagged the
SPX
a bit on this advance from the rising 200-day EMA and confluence zone for
the
SPX. The semiconductors led the technology weakness yesterday, as the
(
SMH |
Quote |
Chart |
News |
PowerRating)
was -2.0%, following a -1.2% day on Tuesday. The SMH had rallied +13.1% from
the
oversold condition (that made it our focus) over a 19-day period from the
34.50
low and RST long setup with the five-day RSI at 12. The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s ended at
36.42, -0.2%, and the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was off 2 points to
1989.

NYSE volume was light again at 1.25 billion,
and
you can get different reasons depending on which empty suit you listen to,
but
it doesn’t matter or change until the Generals put some money to work. If
you
didn’t play the retracement to the rising 200-day EMA on a short-term
position
basis, you’ve already missed the better opportunity, so don’t get caught in
a
chasing mode if they can take price toward the upper retracement zone again
which has been in place since 01/27.

The SPX has risen on declining volume through
the
holiday. It closed at 1114.95 on Wednesday, May 26, with the 4 MA of the
volume
ratio at 71 and 4 MA of breadth at +1425 with the 5 RSI at 79. It hit an
1128.10
high yesterday with the 4 MA of the VR now 59 and breadth +645 with the 5
RSI at
85. Those are not numbers that get this corner interested in the long side,
other than intraday trades.

 

Â	Wednesday 5/26	Thursday 5/27	Friday 5/28	Tuesday 6/1	Wednesday 6/2
IndexÂ
SPX Â
HighÂ	1116.71	1123.95	1122.69	1122.70	1128.10
LowÂ	1109.91	1114.86	1118.10	1113.32	1118.64
CloseÂ	1114.95	1121.26	1120.63	1121.20	1124.99
%Â	+0.2	+0.6	-.06	+.04	+0.3
RangeÂ	6.8	9.1	4.6	9.4	9.5
% RangeÂ	74	70	55	84	67
INDUÂ	10110	10205	10188	10203	10263
%Â	-.08	+0.9	-0.2	+0.1	+0.6
Nasdaq Â	1976	1984	1987	1991	1989
%Â	+0.6	+0.4	+0.1	+0.2	-.09
QQQÂ	36.19	36.42	36.55	36.50	36.42
%Â	+0.6	+0.6	+0.4	-0.1	-0.2
NYSEÂ
T. VOLÂ	1.37	1.44	1.17	1.23	1.25
U. VOLÂ	804	1.03	629	598	713
D. VOLÂ	544	387	519	627	525
VRÂ	60	73	55	49	58
4 MAÂ	71	73	69	59	59
5 RSIÂ	79	84	78	82	85
ADVÂ	2099	2309	1897	1694	1988
DECÂ	1203	1017	1385	1602	1304
A-DÂ	+896	+1292	+512	+92	+684
4 MAÂ	+1425	+1473	+1232	+698	+645
SECTORSÂ
SMHÂ	+0.5	+0.5	+1.7	-1.2	-2.0
BKXÂ	+0.6	-.09	-.02	-0.4	+0.3
XBDÂ	+0.5	+0.3	-0.2	-1.0	-0.5
RTHÂ	+0.3	+1.7	-0.5	+0.5	+0.7
CYCÂ	0	+0.8	-0.3	+0.2	+0.5
PPHÂ	+0.6	+1.1	-.01	+0.7	+0.1
OIHÂ	-1.7	-2.2	+1.3	+0.9	-0.7
BBHÂ	+1.4	-0.6	-0.3	+0.5	+1.0
TLTÂ	+0.5	+0.8	-0.3	-1.3	-0.3
XAUÂ	+1.0	+1.4	-0.7	-1.6	-0.6

^next^

For Active
Traders

The morning intraday high for the QQQ was
36.59
on the first bar, then traded down to 36.21 at the 10:00 a.m. ET period, but
went into a Slim Jim at the lows between 36.35 – 36.21 until a no-volume
breakout after 12:30 p.m. It was above all of its five-minute chart EMAs,
but
not taken in this corner, as the dynamics were flat and don’t like those
lunchtime moves. There was a rush of volume starting at 2:15 p.m. that took
the
QQQ to 36.66 and fading into the 36.42 close. Missed the long side
yesterday,
but did take the four-bar reversal short below 36.48 on the first bar. The
reason was because the QQQs are right at the down trendline from the 39
rally
high. The five-day RSI was 88 on Friday and had hooked down on Tuesday.
There
was good trade logic, but the trade had to be covered on the Slim Jim
breakout,
so not much gain.

The SPY had a similar pattern with a Slim Jim
breakout above 112.80 to 113.48, which wasn’t taken, so simply didn’t
capitalize
on the long side.

The SMH was the long decision yesterday as
they
traded down to 37.49 vs. the 1.5 volatility band at 37.52 and 2.0 band at
37.21.
This was a good entry zone after the opening sharp decline into the 10:20
a.m.
bar, but it Slim Jimmed at the lows between 37.70 – 37.50 until an afternoon
reflex to just 38.03, fading to close at 37.69. Nothing good there, as the
initial trade was timed out in the Slim Jim and the breakout was taken, but
not
enough room, so the trade was scratched on the way down to breakeven. It was
just one of those days for this corner, and that’s why they call it
trading.

Today’s
Action

At this point in the commentary, you now get
the
gist that I don’t like long side position entries at these levels, and I
think
the next good short-term position trade will be from the short side. The QQQ
is
+7.5% on this move and right at its down trendline. The SPY is the same,
having
advanced +5.0% off the 108.06 low to a 113.48 high on yesterday’s doji bar,
which
is right on the down trendline from the 116.95 high.

Looking at the SPY volume, you can see that
it is
a down trending line since the 108.06 low which has a rising price line, so
I am
not a long side player into that. The trade on the initial retracement was
your
sequence trade at the rising 200-day EMA (Generals’ Pullback to the 40-week
EMA).

The DIA has lagged a bit, closing at 102.84
with
104 being the down trendline level with the 3.0 (20-day, 30-minute) band at
104.50 and the 2.0 band at 103.35. The 5 – 5 3.0 band is 103.80, and the 2.0
band is 103.40, so you have your confluence zone going into today’s trading.
102.50 is the median price line starting out this morning.

If the SMHs reverse their two-day decline
that
started at the 89-day EMA, which is now 38.76, the down trendline from the
45.78
bull market high is about 39.50.

Have a good trading day,

Kevin Haggerty

P.S. I’m pleased to announce my
new workshop, Trading with the Generals 2004, will be held at New
York’s Waldolf-Astoria on June 25 – 27. To ensure everyone gets personal
attention, I’m limiting participation to 50 live and 40 live via Internet.  If
you want to attend, make sure you reserve your space early. 

Click here.