Unchartered Waters
The NDX
(
$NDX.X |
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low of 1216.07 which is the .50 retracement zone between the 10/3 low of 1139 and
the 10/4 high of 1314. From there the rally started on the 10:25 a.m. bar
and retraced to the .618 level based on the 1314 high before closing off at
1272. Percentage-wise, the NDX went +15.4%, -7.5% and 5.3% in three days from
10/3 to 10/5. That certainly provided excellent trading opportunities for the
daytrader.
The SPX
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$SPX.X |
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which is the .618 retracement to the 10/2 swingpoint 1034 low from the 10/4 high
of 1084. It
then rallied to 1072 which is the .618 retracement to the 1084 high. 1094 is the
.618 retracement to the 8/27 1187 high and the 50-day EMA is up at 1107. The SPX
has gained 12.8% low to high in ten days and has ample retracement room to the
945 low. During the recent rally, the most significant volume in a sector was
the Semis as evidenced by the
(
SMH |
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center in the trading plan this week.
The shooting has started so
we are in uncharted waters this week and start out early red with the S&Ps
-10, the NDX futures -22 and the Dow futures -100. Any opening selloff will be
mostly retail and this will certainly be maximized by the market makers and
specialists. The trading desks of the brokerage firms will be instructed to
lighten up or get flat on any carryover positions and avoid taking on any size
if they have to make bids to institutional customers. The specialist units will
also avoid taking on any more size than required by NYSE guidelines unless
covering shorts from last week.
Also, if they get hit with
early long positions and we get no contra rally, then the good specialists will
pull the plug so price gets down to a buyer’s level very quickly. Make sure you
are aware of today’s Volatility Bands for the major indexes and the initial
setups will be Trap Doors. Suffice to say if we get a quick contra rally, take
profits early and move to breakeven on the balance of positions. Early Trap Door
focus should be on the
(
QQQ |
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(
DIA |
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(
SPY |
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under these conditions and if the sell-off gets nasty, maybe the Turk will show
up with the magical buy order in the futures which will cause the premiums to
expand and this will in turn bring in the buy programs and the market will once
again avoid a fall off a cliff.
Stocks
Today
Because of the recent SMH volume, it would make sense to keep
some semis on the screen like
(
NVDA |
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(
KLAC |
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(
NVLS |
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MCHP |
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(
BRCM |
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SMHs for early Trap Door moves. Also, because of recent volume, look to
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CSCO |
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(
EMC |
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SUNW |
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(
JNPR |
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Have a good trading day. Keep your powder dry. Only take the
defined entry pattern.
Five-minute chart of Friday’s S&P 500 (SPX) with 8-,
20-, 60-
and 260-EMAs
Five-minute chart of Friday’s NYSE Ticks