Trap Door Morning
Yesterday
morning was good for some of the chosen ones and the financials. There
was good entry in
(
WFC |
Quote |
Chart |
News |
PowerRating),
(
C |
Quote |
Chart |
News |
PowerRating),
(
AIG |
Quote |
Chart |
News |
PowerRating) and also multipoint gains in
(
CMVT |
Quote |
Chart |
News |
PowerRating) and
(
SANM |
Quote |
Chart |
News |
PowerRating). In spite of the selloff that started with the
(
BAC |
Quote |
Chart |
News |
PowerRating) news on the 1:45 p.m. bar, WFC, AIG and SANM closed green. The
timing was perfect for the futures to blow out the Slim Jim which had formed at
the lows between 1368 and 1364 on the S&P 500. After they hit the futures on
two wide-range bars, the S&P cash traded down to 1346 before a little run to
cover shorts up to 1355. It closed at 1351.45, -1.8% on the day. Not
a surprise that we got some down yesterday after the move from the 1294 low to
Tuesday’s high of 1377. There will be a test of that low if we are to gain into
year end which, by the way, is only 17 trading days.
The best case for the
fragile confidence is that we get a 1-2-3 higher bottom after a Fib retracement
to test the 1294 low. Worst case
is that it takes out the 1294 low for a 1-2-3 lower bottom and then reverses it.
That would shake more stocks from the
tree and crush the fragile confidence that resulted from Tuesday’s extreme move.Â
Unlike the NDX, the S&P
500 didn’t make a higher high yesterday and closed in the bottom of its range.
The Fib levels are as follows: .38
1346; 50 1336; .618 1326; and .786
1312. The five-day run for the
S&P 500 is 6.3% low to high. The NDX made a marginal higher high yesterday
at 2892 which is a 466 point and 19.2% run from the 2426 low,
so why wouldn’t you expect it to retrace some? It,
too, closed in the bottom of its range, and you should fully expect a
continuation of the retracement to the 2426 low before any possible upside
continuation. The Fib retracement
levels are .38 2715; .50 2659; .618 2604; and .786 2525.Â
The NDX low yesterday was
2721.81 and closed at 2744, -3.8%, coming off the 11.7% gain on Tuesday. After
the 20% or more gains in 16 of the 25 chosen ones on Tuesday, I expected them to
sell off more than they actually did yesterday. About
ten of them closed green. I was also encouraged to see
(
TXN |
Quote |
Chart |
News |
PowerRating) and
(
ADI |
Quote |
Chart |
News |
PowerRating)
close green, while
(
TER |
Quote |
Chart |
News |
PowerRating) was unchanged. This
was positive vs. Intel getting hit down 4.25 points to 31.75.
The perception by the
Generals, as evidenced by where they have put their money since early October,
is that Greenspan will ease and there might be a soft landing. “How
so?” you say. Look at the
(
XLB |
Quote |
Chart |
News |
PowerRating), which is the basic industry SPDR
and/or some of the major basic stocks like
(
AA |
Quote |
Chart |
News |
PowerRating),
(
IP |
Quote |
Chart |
News |
PowerRating),
(
CAT |
Quote |
Chart |
News |
PowerRating) and
(
DOW |
Quote |
Chart |
News |
PowerRating), along with the financials like
(
FNM |
Quote |
Chart |
News |
PowerRating),
(
FRE |
Quote |
Chart |
News |
PowerRating), AIG, WFC,
(
NTRS |
Quote |
Chart |
News |
PowerRating) and
(
STT |
Quote |
Chart |
News |
PowerRating) all pushing new highs.
If this perception holds
true, can the techs be far behind? That’s why I want you to stay all over the
semis so you can get on board if they go. As
far as the election goes, who the hell knows, but it leads to destructive
futures games and makes all but the shortest trades very difficult. We can only
react to the money flow as the Generals make their decisions on what it means.
Inexperienced traders might be better
served by sitting it out until it is resolved. There are many players long and
wrong at higher levels and after this knife down they will be waiting on the up
staircase to sell you some stock.
face=”arial, helvetica”>(March Futures) | ||
Fair | size=2>Buy | size=2>Sell |
23.10 | 25.00 | 21.60 |
Pattern
Setups
Stocks today: The bias is
to test the recent lows and there weren’t very many good setups from the daily
charts. A few that have a little bit of buying pressure into the close are
(
CSC |
Quote |
Chart |
News |
PowerRating),
(
VRTX |
Quote |
Chart |
News |
PowerRating),
(
CAH |
Quote |
Chart |
News |
PowerRating) and
(
TXN |
Quote |
Chart |
News |
PowerRating). Stay on all the other semis also
on your intraday charts, in addition to the SMHs.
On the short side, possible
airpocket shorts if you get a chance to get good trade-through entry are
(
AMCC |
Quote |
Chart |
News |
PowerRating),
(
ARBA |
Quote |
Chart |
News |
PowerRating),
(
NTAP |
Quote |
Chart |
News |
PowerRating),
(
PMCS |
Quote |
Chart |
News |
PowerRating) and
(
ITWO |
Quote |
Chart |
News |
PowerRating).
Have a good trading day.
Do you have a follow-up question about something in this column or other questions about trading stocks, futures, options or funds? Let our expert contributors provide answers in the TradingMarkets Question & Answer section! E-mail your question to questions@tradingmarkets.com.
For the latest answers to subscriber questions, check out the Q&A section, linked at the bottom-right section of the TradingMarkets.com home page.