Two For Two
It was
an excellent day for traders yesterday,
as the SPX
(
$SPX.X |
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PowerRating) traded up to
the 2:30 p.m. ET program time, then reversed most of its gains. NYSE volume was
once again on the lighter side at 1.3 billion, volume ratio of 67, and breadth
+689. The tech sector was best, as the NDX
(
$NDX.X |
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PowerRating) finished +3.0%, the
Nasdaq
(
$COMPQ |
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PowerRating) +2.3%, while the SPX was +0.8%, and the Dow
(
$INDU |
Quote |
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PowerRating)
+0.3%.
The first of two key
trades yesterday if you were trading the S&P futures and/or the SPYs entailed a
five-bar pullback to the 20-period EMA on your five-minute chart after the first
two wide bars up on the opening. This entry was above the 882 high of the 10:00
a.m. signal bar. If you didn’t take that, you got a second chance above 883 on
the breakout of the bull flag. This trade ran about 11 points before a 1,2,3
higher top sell pattern enabled us to catch the afternoon down trend. The short
entry was below the 892.41 swing point 1 top on the 1:00 p.m. bar, and then the
trend entry followed below the swing point 2 low of 887.79. The trade carried
down to the 880.36 intraday low, as the SPX closed at 882.97. This terminology
is included in
the module.
The 1,2,3 higher top
pattern set up right at the 260 EMA on your five-minute chart and at the 894.33
.618 retracement level to the 925.66 rally high. The pattern high yesterday was
exactly 894.30. Many of you have already ordered the 1,2,3 module, so I suggest
you keep yesterday’s SPX chart for future reference. The initial stop in that
short setup was just 2 points, so the reward-to-risk ratio ended up 5-to-1 and
not a hint of getting stopped out. We have to take it when we get it.
The
(
SMH |
Quote |
Chart |
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PowerRating)s gave us
the same two trades. First, the pullback, then the 1,2,3 short entry below
24.45, which only carried down to 23.75, closing at 23.86, +3.7% on the day.
Regarding the SPX, I
think there has to be some more retracement to the 769 low. The .38 retracement
from 926 to 769 is 866, and the .50 retracement from 769 to 965 is 867, which is
also the Gann .125 number between 769 and the market top high of 1553. The
retracement low so far is Monday’s 874.63 intraday low. If the SPX were to take
out the 925.66 high without some more pullback, then my observation is it is a
continuation of the first leg and a retracement to 769 will follow.
The war drums are beating
and the domestic potential threat heightened, as we all know, so it’s no time to
be a position hero unless you have an option strategy.
Have a good trading day.
Five-minute chart of
Tuesday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Tuesday’s NYSE TICKS