This Zone Is Your Immediate Focus
What Tuesday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) stood still yesterday
with a daily range of just 4.7 points, closing at 1128.31, +0.2%. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) closed at 10,318, +3 points, while the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating)
at
1915 was +0.3%, and the
(
QQQ |
Quote |
Chart |
News |
PowerRating) 35.63, +0.1%.
NYSE volume was light again at 1.2 billion
shares, with the volume ratio neutral at 53 and the 4 MA now 61. Breadth was
a
-85 vs. the small gain in the major indices, so that is not a positive from
yesterday’s market action.
The sector bias was defense, as the leaders
were
the XAU, +1.8%, BBH, +1.3%, XLV, +0.8%, PPH, +0.6%, and XLE, +0.5%. The
(
SMH |
Quote |
Chart |
News |
PowerRating) had a fifth straight up day at +0.5% as the volume dropped off
considerably from the previous three days.
For Active
Traders
I have included yesterday’s five-minute chart
of
the
(
SPY |
Quote |
Chart |
News |
PowerRating), highlighting the choppy Slim Jim breakout above 113.40. It
was
good entry, but weak result. The QQQ had a similar breakout, hitting the
previous day’s high of 35.72 and fading to close at 35.63.
The SPX daily chart highlights the RST long
entry
above 1067.58, which was also a minor support zone. The .382 retracement to
the
769 October 2002 low is down at 1012. The SPX has rallied +6.5% off that low
and
is now pushing the upper resistance zone outlined in the 09/13 commentary.
This
RST set up as the Nasdaq hit 1751 vs. its 1753 .382 retracement to the
October
2002 low. It is +9.6% off that 1751 low. The other sequence, in addition to
extended standard deviation zones, was the QQQ at 32.35 vs. its .382
retracement
to the October 2002 low of 31.65. The SMH .618 retracement to its 17.32
October
2002 low is 28.19 and bounced +9.5% from that low on the first move. Net
net, if
you trade the RSTs, you have all the confluence you needed. The SMH then
declined -10.4% to 27.78 and this second bounce from the .618 zone is +13.2%
low-to-high. The volatility of the SMH has been excellent, with the first
rally
to 31 being six days, then the -10.5% decline in 10 days, and now this
+13.2%
move is five days old. The semis are a professional trader’s primary money
maker, both long and short.
On the SPX daily chart, you can see that the
next
RST will form somewhere above 1146.34, and those of you who have the
materials
know the rules.
The next two charts are the VIX and VXN daily
charts, which are in RST territory, but haven’t given you the entry close
yet.
This is the inverse relationship to extended major indices and part of your
sequence confluence to be aware of.
The charts are an ongoing educational
follow-up
for traders who have purchased my material.
Today’s
Action
Yesterday was the 21st day of the rally, so
the
upper resistance levels become a stronger focus today.
The QQQs are at the 35.68 .50 retracement to
39
from 32.35 with three other key inflection points above from 35.75 –
36.
The SMHs are +13.2% to the 31.40 50-day EMA
in
five days, so any turn here will produce some good intraday shorts. The SMH
volume dropped to 28.2 million yesterday after the 40 mm, 34 mm and 38 mm
for
the previous three days.
The 1135 – 1141 zone is the immediate SPX
focus.
In
yesterday’s commentary, I reiterated this
corner’s market outlook, risk profile, and the strategy. My longer-term
expectations have not changed from six months ago, which is that I don’t
expect
this bull market to make it past early 2005, which is a life of about 2.2
years
off the October 2002 lows. If the SPX has a fifth leg above 1163.63, it
would
set up some excellent short opportunities.
Have a good trading day,
Kevin Haggerty
