Volatile Zone
It was
a bell curve-shaped week for the SPX
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$SPX.X |
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PowerRating) as
the index hit an 882.92 low on Monday, then rallied up to 924 on Wednesday,
9/11, and then down to an 877 intraday low on Friday, closing at 888.93. Suffice
to say it was a week of emotional reactions to the barrage of news as we get
closer to confrontation.
Just below you have the
870.50 low, which is the .50 retracement to the 776 low, and now a magnet to be
taken out before any reversal or continuation on the upside. The 20-period EMA
on the 60-minute chart is about 893, which is the .618 retracement between 965
and 776. So far, the SPX has two failures at the 930 head-and-shoulder neckline.
The first was a rally from 903 to 928, and last week it ran from 870.50 to the
924 Wednesday high.
Last week, NYSE volume
was very light, with Friday being the heaviest at 1.2 billion, volume ratio of
56, and breadth +382. We are entering a strong cycle time zone along with Triple
Witch on Friday and quarter’s end, so we obviously expect volatility with or
without terrorist news.
The major indices are
currently in 1,2,3 higher bottom patterns until, for example, the 870.50 low is
taken out on the SPX. This index declined from 965 to 870.50, then retraced to
924, which is the .618 zone, then down to the 877 intraday low on Friday,
closing at 889. If the 870 low gets taken out, then you must be aware of the Fib
extensions for the 870 – 924 leg, along with the parallel line symmetry of the
965 – 870 leg where AB=CD at the 830 level.
As I have said before, I
expect the 870 low to get taken out before a run above 965. I would use the
20-period EMA on the 60-minute chart as an upside trigger for any intraday long
entry and do the same for the
(
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PowerRating)s.Â
The Nasdaq Composite
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PowerRating) closed at 1291, which is just above its 20-period EMA on the
60-minute chart, and the
(
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PowerRating)s also closed just above the 20 EMA, so both
are intraday up until shown otherwise.
The quarter’s end will
probably see the Generals blowing out more of their dogs as they shuffle their
portfolios, so that will add to the current program volatility, which has been
running at about 35% – 40% of NYSE volume, which is extremely heavy for program
trading.
Have a good trading day,
and keep your stops tight.
Five-minute chart of
Friday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Friday’s NYSE TICKS