Two Concepts I Want You To Focus On
I got no
divine enlightenment from yesterday’s action. NYSE volume was 1.48
billion, volume ratio 41 and breadth -168. That did not indicate buying or
selling pressure. The SPX
(
$SPX.X |
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PowerRating) lost 0.5% and the Dow
(
$INDU |
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-0.3%.
The Nasdaq
(
$COMPQ |
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PowerRating) and NDX
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$NDX.X |
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PowerRating) lost 1.1% and 1.5%, as tech took a breather. Some of the smaller
tech stocks have gotten pretty frothy during this rally. The Nasdaq volume ratio
was 26, so that divergence between the NYSE volume ratio of 41 gets my
attention, as the Nasdaq/NDX have been leaders.
Markets can retrace or they can go
sideways in a narrow range to alleviate any short-term overbought conditions,
and so far this has been a narrow-range week. That is evidenced by the SPX
trading in just a 15-point range, or 1.6%, between 939.61 and 924.55 so far this
week. That’s consistent with the 935.05 previous high and the 924-925 level
which is the current support.
The Dow has ranged between 8641 to
8511 for 130 points, or 1.5%. You don’t need for me to tell you that this range
will probably be resolved sooner than later. The significance of this week’s
range so far is that it’s the narrowest week’s range throughout this entire
bottoming process since last July and is the eighth week up in this current
rally, so there should be no surprise if we get the short-term retracement,
hopefully down to the 200-day EMA, which for the SPX is now around 906.
The semis were -2.4% yesterday, but
they have led this rally from day one, as they do most often and along with the
NDX, must be watched closely, as any retracement will most likely start with
them. For example, looking at your weekly chart, you see the most significant
positive divergence of this entire rally. The SMHs bottomed on retracement to
the October lows the week of February 10, and now in the 13th week of the rally
from the low close week which was February 3. These should be familiar numbers
for you, such as 3, 5, 8, 13, 21, 34, etc. You get the point
On the other hand, the SPY
retracement continued down into the week of March 10 before starting this rally
and now in the eighth week and so far it’s a doji bar week. FYI, the SPY had
advanced eight weeks from the October lows to the December highs and then
declined fourteen weeks to the recent lows and as I said, now in the eighth
advancing week of this rally.
FYI, the Nasdaq retracement bottom
for the October lows was also the week of March 10, but the NDX 100
bottomed with the semiconductors the week of February 10, and this index is
where the Generals dominate as opposed to the retail-oriented Nasdaq composite
The purpose of today’s commentary is
to get you to focus on relative relationships and that you should be aware of
price and time.
It’s not the lines, it’s what you
use with them that gives you the edge.
Have a good trading day.
Kevin Haggerty
Five-minute chart of
Wednesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
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Five-minute chart of
Wednesday’s NYSE TICKS