The Strategies Are Working — Are You Using Them?
What Thursday’s Action Tells
Us
After the three bar early down on the opening,
the Dow
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50-day EMA, trading up to a 9135 intraday high for a reversal of about 100
points above the 50-day EMA pivot and closed at 9126.44, +0.7% on the day. The
SPX
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at 1652, less than a point below its previous close. The QQQ was +0.3%.
Total NYSE volume was 1.36 billion, a volume
ratio of 62, and breadth +678. Except for the SMH at -0.3%, the rest of the
major sectors closed green, led by the OIHs, +4.3%, and the RTH +1.8%. The TLT,
which is the long bond proxy, was up again at +0.5%, while the CYC was
essentially flat. The common thread in the NDX 100 was the Biotechs, with 40% of
the top 25 gainers being biotechs. The Biotech HOLDRs
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above its 50-day EMA of 126.15, so that’s a focus for today.
For Active Traders
It was another good day for traders using the
strategies. The Dow, after giving you a simple reversal above the 50-day EMA,
rallied to 9089 then retraced to 9046, just above the 50-day EMA, setting up a
1,2,3 higher bottom with entry above the 10:25 AM signal bar high of 9065.67.
This run traded up to a 9135 intraday high, closing at 9126.45. The SPX also
gave you a 1,2,3 higher bottom long entry above 966.38, which was also the 10:25
AM signal bar high. The intraday low was 963.82, so this zone has provided
traders some good intraday opportunities, not to mention the rally from 962.10
to 1015.41. The E-mini 1,2,3 higher bottom entry was above 965.50. The SMH had a
Trap Door setup, with a Kings & Queens entry above the 10:25 AM signal bar high
of 31.40, but only ran to 31.72 on the 11:40 AM bar before reversing to a new intraday low of 31.20, closing at 31.38. This was certainly a negative intraday
divergence to the SPX and Dow. The QQQ also provided a Trap Door entry above
30.13, which only traded to a 30.50 intraday high, closing at 30.31.
Starting today, the SPY closed at 98, which is
right at its 50-day EMA of 97.97, so you have a frame of reference to watch
today as an early pivot just as the Dow was yesterday. Price action gets active
around the psychological 50- and 200-day moving averages, which always provides
either a position or intraday opportunity. The double bottom is just below at
96.43 and 96.34. The QQQ closed at 30.29, just below its 50-day EMA of 30.55,
while the Nasdaq closed at 1652 versus its 1658, 50-day EMA. In order to day
trade these kind of pivots you must be ready to stop and reverse in either
direction because second entry occurs often.
Today’s Plan
If anybody shows up in the biotechs today, look
for setups in TEVA, IVGN, SEPR and GILD, and if you play the BBHs, they
are at a possible pivot point, just as the SPY is. Also look at APOL, PCAR, and
SNPS.
The SPX is now 10 weeks into the 1020 – 960 box,
with two 1015 highs and two 960ish lows. 1020 is the .618 retracement to the
last primary 1174 swing point high prior to the 769 low, so to get churning in a
primary Fibonacci zone should not be a total surprise after a +32% move in the
SPX to the first 1015 high in eight months time.
From a longer-term position standpoint, the major
indices are all trading above their rising longer-term moving averages, so turn
off all this daily media hype and key on that, as you are not trying to play
these daily trading range fluctuations, which by the way, have been excellent
for the synthetic delta neutral straddle put on in this corner for the very
reason that the SPX was at a key inflection point zone after a substantial move
with implied volatility at the lows.
Have a good trading day,
Kevin Haggerty
