Use Some Trade Logic, People…Here’s What I Mean
For
someone who plays the numbers, the recent NYSE
volume total would be a good hunch. Yesterday was 1.36 billion is currently
pegged there as the daily range for the major indices has narrowed along with
the shrinking volatility. The SPX
(
$SPX.X |
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PowerRating),
Dow
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$INDU |
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$COMPQ |
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-0.3%. The SMHs
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SMH |
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NYSE volume ratio was neutral again
at 53 and breadth was nondescript at -83. The SMH, QQQ,
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QQQ |
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PowerRating) and E-mini
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ESM3 |
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PowerRating) provided the best trades of the day on opening reversals. The SMH
reversed the 28.29 opening, which was also the low of the opening bar and traded
down to the intraday low of 27.50 by the 10:25 AM bar for a nice -2.8% decline
from entry level. Hope you caught some part of that.
From there, it formed a symmetrical
triangle that was opportunity, but after the breakout above 27.65 it only
carried to 27.85, then went sideways and choppy for the remainder of the
session, closing at 27.95.
Based on how it traded, you were out
of the trade before that. The QQQ had a similar pattern. The SMH closed right at
the 240 EMA on your 5-minute chart and a potential RST sell pattern. The SPY
must trade above 94.56 before the RST sell can come into play. The SPY
closed at 94.51. If we trade up early, watch the 94.73, then 94.95 levels, which
are retracements to yesterday’s intraday high.
Use some trade logic when price hits
awareness levels. Some of you, by your e-mails, seem to be playing the pattern
itself regardless of any thought to market dynamics on how price approaches an
awareness level or what the overall situation is. If it enters like a
freight train on thrust it usually means it’s going through to the next level.
Another point to remember is that
when narrowing volatility reduces the number of available trades in the index
proxies/futures, then in order to put money to work you must scroll the stock
list where you will catch some more moves occurring at different times, both
long and short. If you just trade futures or index proxies, then don’t be
reluctant to keep your hands and money in your pocket unless a well-defined
trade presents itself. Do not, under any circumstances, resort to
scalping, which is a loser’s game for 95% of traders – certainly all new
traders.
Yesterday was a perfect example of
taking the intraday short setups in this high end of resistance. Just draw your
resistance line from the 923 1998 bear market low through the 945 September ’01
low on the weekly chart in order to define that head and shoulder resistance
from the 1998 low.
For the last three days the intraday
highs have been 946.84, 947.51, and 947.29. The low end of that range is 939.74,
939.36 and 938.91. The SPX closed at 939.28 The low close on September 21, ’01
was 965.80 and the highest intraday high so far since the July 22 low is 965,
with the high close at 962.69.
Currently the SPX is above all
of its rising EMAs, including the 8-day EMA, so until that changes, subjective
opinions are not needed and are useless. This corner is taking off 25% of the
long unhedged index proxy position into this move, with trailing stops on the
balance. You can’t take the mark-to-the-market percentage gains to the bank
until you sell some. It’s a game of moves and this three-month rally has
produced significant gains that should be captured and the balance protected.
They don’t come easy and going forward might be tougher to make.
Have a good trading day.
Kevin Haggerty
PS
Spend a full weekend with me June 20-22.Â
Click here for details.
Five-minute chart of
yesterday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
yesterday’s NYSE TICKS