The Best Trade Of The Day
All of
the trading action yesterday was before 11:00 a.m. ET,
as the major indices traded sideways from
12:00 p.m. into the 4:00 p.m. close. There was an SPX
(
$SPX.X |
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PowerRating) Trap Door
short entry after the 10:00 a.m. signal bar that traded down to 888.17, where
you then got a retracement buy setup. 888 was the .50 retracement to the 877.92
previous retracement low. The 10:40 a.m. bar was the signal bar, which was also
an outside bar. Entry was above 890.15, but this trade only ran to 894.51 before
going sideways into the close at 892, slightly below Thursday’s 893.58 close.
The Trap Door was the best trade and then it was a non-event after that. The Dow
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$INDU |
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PowerRating) finished -0.1%, closing at 8329, the Nasdaq
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flat, while both the Mid-Cap and Russell 2000 finished slightly green. NYSE
volume was 1.1 billion, a volume ratio of 56, and breadth -340, so that didn’t
tell us a whole lot.
The Dow has some air
below the 240 EMA on your five-minute chart, which was at about 8320 and below
the closing range low of 8314.61. For the SPX, the closing range low was 890 and
the 240 EMA is at about 889, with yesterday’s intraday low at 888. The last four
days have been bumping up against this .786 zone to the 904.89 rally high. The
last four intraday highs have been 891.27, 896.17, 893.83, and yesterday’s 898.
The highest close of those four days has been Thursday’s 893.58. It is no secret
to what has to happen on the upside.
The
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SMH |
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PowerRating)s have been
strong for the past five days and closed at 26.65 vs. the five-day high of
26.67, with the 240 EMA on the five-minute chart down below at 26. The
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QQQ |
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PowerRating)s closed at 26.88 after a 27.11 intraday high and above the 26.65 240
EMA on the five-minute chart. Suffice to say, the 820 Trend Identification is
still up for the major indices and SMHs, so nothing bad happens until these
60-minute charts start trading below their 20-period EMAs.
Other major sectors, like
the
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BBH |
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PowerRating), the BKX, the XBD and retail, are still trend positive on their
60-minute charts. The best continuation shorts won’t happen until these
60-minute chart trends start to turn negative, and that’s reality, not
subjective, so don’t tire yourself out with the mental gymnastics until you see
it start to happen, then you can act on what you see, not what you think should
be.
From the stock screener
yesterday, the common thread for the NDX was the positive percentage change in
some of the semis, but certainly on less than average volume, just like the NYSE
volume.
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS