Thin Week
The
major indices churned on Friday,
but put in another week of percentage
gains. The Dow
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were all off from 0.5% to 0.2% on Friday, but on the week, the Dow was about
+3.0%, the SPX +2.3% and the NDX 100 +5.0%. Tech continues squeezing the shorts,
in addition to the telecoms, networks and Internet stocks that are doing the
same. Anyone that tracks low-priced junk stocks is having a field day. The
bottom line for last week was higher lows and highs for the major indices with
closes in the top of their ranges above the previous week’s highs.
The SPX closed at 930.55
as it pushes into the upper band of resistance. In fact, it is only 6.0% below
its 12-month EMA of 989. The last time it was there was in March of this year,
hitting a high of 1176 before declining into the 776 and 769 lows. The semis are
pushing the envelope big time with the SMHs +67% in just 32 days. In comparison,
there was a +68% gain for the SPX from the 1998 bear market low to the March 24
all-time high. The +67% move has been, and is under, a cloud of negative
opinion, which certainly highlights the perception and short-covering side of
the equation. The Dow is just 3.0% below its 12-month EMA of 9083. Prices of the
major indices and semis are pushing the upper boundaries, whether it be standard
deviation bands, volatility bands or regression channels. Option indicators like
the put/call ratio is below .60, the lowest since the August highs.Â
This is a holiday week
and one that is historically slow. I call it a beach ball week, as the trading
gets thin and many rookies are on the specialist books, so stocks can get
muscled very easily, as the specialists shy away from any kind of positions.
Friday’s NYSE volume of 1.6 billion was about 15% above average, a volume ratio
of 49 for a three-day overbought average of 68, and breadth +187. Friday’s
volume might be the most we see until next week. Nothing bad can happen,
however, until there is at least a downside reversal bar on the daily chart, and
for you 1,2,3 higher top players, that is below 925.66.
Because of the holiday
week, I suggest you keep tight stops because there will be some erratic moves. I
prefer daytrades only until the end of the week to see how the indices behave at
these levels and if there is a change in direction weekly bar with the close
below the mid-point of the week’s range. I see no position edge at these levels
to initiate any new long positions in the major indices or most of the major
sector HOLDRs.
Have a good trading day.
Five-minute chart of
Friday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Friday’s NYSE TICKS