This Is The Drill You Go Through Daily
What
Tuesday’s Market Action Tells You
The SPX
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almost flat from yesterday at 1011.69 and 9323. It was a very
narrow-range day, finishing with a doji bar for both indices. The SPX had a
range yesterday of only 7.9 points and obviously there was no real intraday
travel range. The previous day’s late markup was given back as the E-mini Trap
Door took it back down into the previous range where it broke out from. That was
the only real action of the day unless you played the losing scalping game just
to do something. Bottom line, at the end of the day was that prices held, and
there was no obvious institutional selling.
The Drill
NYSE volume was 1.4 billion, volume ratio neutral
at 54 and breadth -208. I suggest you keep a 3-4 day moving average of the
volume ratio, which is simply advancing volume divided by advancing volume plus
declining volume, and a 5-day average of the advances minus the declines because
it gives you a good pulse of the very short-term moves, assuming you’re an
active trader.
The major sectors were all chop, with the
Semiconductor HOLDRs
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-0.6 while the CYC finished at +0.4, as did the XBD. The Oil OIH gave back
1.8% and have now snapped back from the extended one-year volatility band for a
quick -10% in four days after hitting the extended band. There was money taken
off the table there as the recent decline was on the biggest volume for the OIH
this year over the last four days and in fact from the July 24, 2002 bottom. It
is getting back into a zone where we might find some players that think they can
run them up once again. Yesterday’s low was 61.11, with the 50-day EMA at 60.66,
the 89-day EMA at 59.17, and the 200-day at 58.14. This sector gets back on our
radar now just because of price, and you should watch volume closely especially
if the range narrows and volume expands and price holds this 60.66 – 58.14 zone.
That’s precisely the drill you go through daily
as trading vehicles move in and out of line. You buy or sell them the correct
way, not the media or stock tout way. Traders didn’t get much from the major
indices yesterday but you did get some decent trade in the stocks from
yesterday’s focus list like KRON, USAI, EXPE, EBAY, NVLS, and MRVL. Many
of yesterday’s stocks will still be in focus today.
The institutions have blinders on now as they
focus on this quarter’s window dressing, chomping at the bit to have two-plus
quarters in a row while dropping off two negative quarters. The funds’ marketing
suits love that and that’s when they pump the jam with more money into
advertising going after John Q. Public, most of whom will fall into the same
trap as they were in before. There’s nothing wrong with having the professionals
manage their money, but at least learn how to manage the managers. I’ll have
more on that as we go along.
Today’s Plan Of Attack
I am doing this Tuesday night for Wednesday, as I
will be traveling to Los Angeles to give the 2 1/2 day seminar this weekend so I
don’t know what game is being played with the Globex futures market pre NYSE
9:30 opening. I guess I shouldn’t be so cynical about it because it is keeping
first-hour traders — who understand how to play the contra move — in a very
profitable zone. Net net, the futures went out at a 1015 – 1010 narrow range
triangle, so the day starts there, both ways.
Stocks that still set up on the daily charts are:
EBAY, KRON, USAI, EXPE, EDS, MERQ – which has
held its longer-term 40 breakout level so far — KLAC, NVLS, SMH, IFX, QLGC,
CTXS, ROOM, and SNPS. On the short side, stay with the index proxies and HOLDRs
if the market fades.
Have a good trading day.
Kevin Haggerty
