Traders Should Get Some Volatility Today
What Friday’s Action Tells
You
It was a short week with a narrow range of
just
15.8 points for the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating), not the kind of travel range that
is
trader friendly. The SPX went out for the week with an 1129.17 high and
1113.32low, closing at 1122.50, +0.5% on the week, as did the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) at
10,243. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was -1.2% at 1979 and the
(
QQQ |
Quote |
Chart |
News |
PowerRating)
was -0.9%
on the week, closing at 36.19. The QQQ travel range was narrow also with a
four-day range of 36.66 – 35.82, closing at 36.19. This lack of travel range
and
the consolidations come right at the down trendline for the
(
SPY |
Quote |
Chart |
News |
PowerRating) and
QQQ,
while the DIA lags with 104 being the down trendline and 105 the three-month
1.0
standard deviation band. The
(
DIA |
Quote |
Chart |
News |
PowerRating) closed at 102.66, right at its
three-month median price line. Both the SPY and QQQ are at their 1.0
standard
deviation bands for the same three-month period.
Friday’s SPX high of 1129.16 was the 16th day
of
this retracement off the rising 200-day EMA and other confluence, which you
were
made aware of several times well in advance. In light of the June Triple
Witch
on June 18 and the key time period around the June 15 date, in addition to
the
16-day rally, this corner put on synthetic straddles last week in
anticipation
of some volatility into and after the key time period. Just like the Dow,
the
VIX is right at its median price line, and that will be resolved, which is
another reason for the synthetic straddle. I don’t care which direction.
Monday 5/31 |
Tuesday 6/1 |
Wednesday 6/2 |
Thursday
6/3 |
Friday
6/4 |
Net | |
Index |
||||||
| SPX |
||||||
High |
H | 1122.70 | 1128.10 | 1125.31 | 1129.17 | 1129.17 |
Low |
1113.32 | 1118.64 | 1116.56 | 1116.64 | 1113.32 | |
Close |
O | 1121.20 | 1124.99 | 1116.63 | 1122.50 | 1122.50 |
% |
+.04 | +0.3 | -0.7 | +0.5 | +0.5 | |
Range |
L | 9.4 | 9.5 | 8.7 | 12.5 | 15.8 |
% Range |
84 | 67 | 0 | 47 | 58 | |
INDU |
I | 10203 | 10263 | 10196 | 10243 | |
% |
+0.1 | +0.6 | -0.7 | +0.5 | +0.5 | |
Nasdaq |
D | 1991 | 1989 | 1960 | 1979 | |
% |
+0.2 | -.09 | -1.4 | +0.9 | -1.2 | |
| QQQ |
A | 36.50 | 36.42 | 35.92 | 36.19 | |
% |
-0.1 | -0.2 | -1.4 | +0.6 | -0.9 | |
NYSE |
Y | |||||
T. VOL |
1.23 | 1.25 | 1.23 | 1.11 | 1.20 | |
U. VOL |
598 | 713 | 238 | 833 | 595 | |
D. VOL |
627 | 525 | 983 | 222 | 589 | |
VR |
49 | 58 | 19 | 79 | ||
4 MA |
59 | 59 | 45 | 51 | ||
5 RSI |
82 | 85 | 56 | 66 | ||
ADV |
1694 | 1988 | 890 | 2150 | 1680 | |
DEC |
1602 | 1304 | 2405 | 1104 | 1604 | |
A-D |
+92 | +684 | -1515 | +1046 | +307 | |
4 MA |
+698 | +645 | -57 | +194 | ||
SECTORS |
||||||
SMH |
-1.2 | -2.0 | -2.5 | +2.0 | -3.7 | |
| BKX |
-0.4 | +0.3 | -0.8 | +0.5 | -0.4 | |
XBD |
-1.0 | -0.5 | -1.0 | +1.9 | -0.6 | |
RTH |
+0.5 | +0.7 | -0.2 | -.01 | -1.0 | |
CYC |
+0.2 | +0.5 | -1.5 | +0.9 | +0.1 | |
PPH |
+0.7 | +0.1 | -.08 | +0.5 | +0.5 | |
OIH |
+0.9 | -0.7 | -1.4 | +0.2 | -1.0 | |
| BBH |
+0.5 | +1.0 | -1.5 | -.09 | -.09 | |
TLT |
-1.3 | -0.3 | +0.2 | -0.6 | -2.0 | |
| XAU |
-1.6 | -0.6 | -2.3 | -0.7 | +3.3 |
^next^
For Active
Traders
The opening gaps on Friday held up with only
minor pullbacks until the last half-hour when price declined into the close.
The
QQQ came out of a consolidation to new intraday highs above the 34.40 – .45
range and only made it to 36.62. Both levels are right at the resistance
mentioned earlier, so there was no interest long for this corner. The QQQ
faded
from the intraday high to a 36.19 close, which was below the 36.33 open, but
above the previous 35.98 close. The SPY had a similar pattern, fading from
113.57 to a 112.98 close.
What you did on the short side Friday
depended on
what you felt about the current rally, which is 13 days for the QQQ in
the
current resistance zone. The same held true for the SPY/futures, which is 16
days off the low. Your trade logic on taking a pattern entry has to be
balanced
with the current resistance/sequence levels, OB/OS, and also the time count
of
the rally. For this corner, that meant no breakout entry to intraday highs,
but
participated on some short side. This is a key point for you active traders
that
have a tendency to get caught up in the mechanical aspect of different
patterns
and go blank on your trend logic or sequence awareness of where price is.
Today’s
Action
The early futures are green at 6:45 a.m. ET,
with
the S&Ps +6.3, the Dow +58 and Nasdaq +12, so certainly traders will get
some
volatility today. Rising strength into the mid-June period will set up a
good
short-term position reversal opportunity, and this corner has no interest in
buying the strength prior to that from any position basis. It will be
daytrades
only, synthetic straddles, and then sell more more out-of-the-money calls if
the
SPX can make it back to the 1150 – 1161 zone, but would probably leg in on
some
above 1140 depending on there being no change in the current
dynamics.
Have a good trading day,
Kevin Haggerty
P.S. I’m pleased to announce my
new workshop, Trading with the Generals 2004, will be held at New
York’s Waldorf-Astoria on June 25 – 27. To ensure everyone gets personal
attention, I’m limiting participation to 50 live and 40 live via Internet. If
you want to attend, make sure you reserve your space early.
Click here.