Trap Doors And V-Bands
The
first day of the new month saw
the major indices move up to the top of the range once again, and I see the
early morning hype has the futures strong green. The media is all over the FOMC
Wednesday meeting and probable rate-cut talk, i.e., Fed funds pricing a 90%
probability of a rate cut on rates that are already at 40-year lows, and you
can’t go below zero. I look at any announcement that produces a flash upside as
a short opportunity into the 930 – 950 zone on the SPX
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Microsoft
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essentially a non-event. We have been there before. If the Democrats take
control Tuesday, MSFT becomes their flagship whipping boy once again, and if
not, MSFT still has to maintain a very aggressive growth rate to be able to
sustain their current valuation, and that means strong focus around new products
and hopefully a very strong pick up in the computer market which hasn’t been
seen yet.
I certainly don’t feel
sorry for the nine money-grabbing states which wouldn’t give more than a few
pennies of any settlement to their “small disenfranchised investors” that have
no other real choices other than MSFT. It’s just a money grab, kind of like the
tobacco settlement of billions, most of which went to everything else other than
preventing or curing the addiction problems. The liberal media certainly doesn’t
press that side of the equation, just the big bad tobacco company side that knew
it was addicting all along. Excuse me? Why has the government approved something
that they knew was an addictive drug from day one?
The push on Friday
started just after 10:00 a.m. ET, as the SPX traded down from the previous
885.25 close to an 877.71 intraday low. The rally got going on the 10:30 a.m.
bar and took the SPX to an intraday high of 903.42, closing at 900.03, which is
a new closing range high, and will certainly move higher this morning.
NYSE volume was 1.45
billion, the volume ratio a strong 75, and breadth also very positive at +1398.
The SPX gained 1.7%, the Dow
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+3.0%, as all the junk stocks are getting covered, and the Nasdaq
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and the OSX +5.1%, which doesn’t surprise us as we saw the buying pressure show
up in my index screens last week. Volume will usually precede price if the
Generals are active in a sector. In addition to the major index resistance
discussed at length in previous commentaries, many of the major sector indices
are bumping up against their 200-day EMAs, like the BKX, which is +28% in this
16-day rally, the XBD which is +32%, and the OSX, which is +23%. The CYC is at
its 50-day EMA, and both the
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so you do have some inflection points to watch.
I see the pre-opening
prices are getting jacked up, which could set up some quick Trap Door contra
moves. The
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believe was up about 5.0% after the close on Friday. Some of the semis are also
getting marked up on light volume, as usual:
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+5.9%,
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NDX 100 low-priced junk stocks are all trading up. Have your stock volatility
band sheets ready to go this morning because your first two opportunities will
be Trap Door contra moves and then a possible pullback setup if the Generals are
going to put some more early November money in today.
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