The Trading Plan Remains The Same…
What Friday’s Action Tells
You
The major indices completed the third best
week
of the year relative to price gains, and all three weeks were from key price
zones as I view them. Of course, the majority were negative at the start of
each
move. Markets are meant to be traded both ways. For example, the
(
QQQ |
Quote |
Chart |
News |
PowerRating)
had a
+5.3% move in March and +7.2% in May, both from the 200- and 233-day EMA
zones.
This current move, which is +4.6% so far, is from the .382 retracement to
the
October 2002 low 19.76 low. Needless to say, the oscillator and momentum
indicators were also oversold at the time.
Friday was the fifth rally day off the recent
low
and also is the fifth month down from the 1163 SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) high. The
SPX
has made two intra-month lows below the 12-month EMA, now 1088.17, but has
yet
to close below its 12-month EMA.
Last week must have frustrated the media with
record oil prices and a rising stock market, not to mention the 32,000 jobs
data
they are still harping on. Yet, that 08/06 Friday was at the lows of the
previous decline into that report. (The beat goes on.) Now, after the fact,
it
is the “market was due for a rally,” but I didn’t hear the words
“buy them” from
the price zone and trigger time.
Friday was a trend up day as the opening bar
proved to be the intraday low, just as it was on Wednesday. In fact, it was
trend up all day with just retracements to the 20 EMA. The SPX closed at
1098.35, +0.6%, and just over +3.0% on the week. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was
+0.7%
to 10,110, with the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) now 1838, +1.0% on Friday and
+4.6%
for the week having bounced off its 1754 .382 retracement zone to its
October
2002 low. The same is true for the QQQ which closed at 34.01, +1.0%, which
is
the initial resistance outlined last week. The QQQ was +4.5% on the
week.
NYSE volume was 1.2 billion and has been in
that
zone for the past five days, which is not unusual for August trading, in
spite
of the price movement both ways. The volume ratio was 82 on Friday, with the
4
MA remaining overbought at 69 vs. 74 and 71 the previous two days. Breadth
was
positive on Friday at +1661, with the 4 MA at 938, declining from +1209 and
+979
on Wednesday and Thursday.
In the primary sectors, the brokers (XBD) was
+1.3% on Friday, but led the sectors on the week at +7.2%. The leading
sector on
Friday was energy again, as the
(
OIH |
Quote |
Chart |
News |
PowerRating) was +3.4% and is +6.2% in three
days
off its 40-week EMA of 67.96, 12-month EMA 67.74 and 200-day EMA at 67.70.
Last
week’s low was 68, and we just simply caught that move cold, provided you
were
able to get yourself to pull the trigger in front of all the negative
sentiment.
The OIH closed the week at 71.75. It’s seven-month closing range is 74.78 –
66.20 with the high/low at 76.39 – 63.83.
Today’s
Action
The SPX closed at 1098.35, right at its
12-month
SMA of 1099 and the 200-day EMA at 1092.96, 12-month EMA at 1088.17 and
233-day
EMA at 1086.62. This gives you the initial downside focus. The 50-day EMA is
1099.33. The
(
SPY |
Quote |
Chart |
News |
PowerRating), which closed at 110.48 and is above all of its key
EMAs,
which has the 12-month EMA at 110.35, the 40-week at 109.79 and the 200-day
EMA
at 109.73 as the immediate downside focus. The upside scale short stops are
above 1108.60 or 1114, which is the .618 retracement to the last primary
swing
point high of 1146.34. The daily chart oscillators are now overbought, but
certainly not the weekly chart.
Now that price has made a move off a price
zone
into major resistance for the SPX and Dow, you start the week off with a
different viewpoint than you had at the retracement zone for the QQQ, Nasdaq
and
(
SMH |
Quote |
Chart |
News |
PowerRating). Above 110.64 puts the SPY above all of its weekly 5, 15 and 40
EMAs,
and for the
(
DIA |
Quote |
Chart |
News |
PowerRating)s it is 101.45, as it closed Friday at 101.25.The
weekly
downtrend channel line is up at 104, and 114 for the SPY.
The trading plan remains the same, buying the
retracements into price zones and selling retracements into resistance.
Have a good trading day,
Kevin Haggerty
