Watch The Month-End Bias
What Thursday’s Action Tells
You
The Generals appear to have shown up
yesterday
into month-end, as the SPX
(
$SPX.X |
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PowerRating) got back to the price level
before
the PPI hype, closing at 1200.20, +0.8%. The Dow
(
$INDU |
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10,749, the
(
QQQQ |
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PowerRating) +1.3% and Nasdaq
(
$COMPQ |
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PowerRating) +1.0%. The primary
sectors were all green with the
(
SMH |
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PowerRating), the semis, leading at +2.1%. The
(
OIH |
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PowerRating) was +1.3% and XLE +2.0% as the energy roll continues. The XLI
(industrial sector SPDR) was +1.4% with the XLB (basic materials SPDR)
+1.1%,
while the BKX, +0.5%, XBD, +0.3% and RTH, +0.3%, underperformed the SPX.
NYSE volume was 1.5 billion shares with a
positive volume ratio of 73 and breadth +1231, but the meaning of internals
is
often skewed into month-end and the first few days of a new month.
Meanwhile,
traders capitalize as the Generals pump up their stocks as the horse race is
fixed.
Yesterday’s move was also on the time date
measured from the 06/25 and 10/06 highs. My comments on that and the Feb.
16,
17, 18 time zone are in the
02/14 commentary.
If you trade the first hour which, on
balance, is
the most profitable period of the day, you started with a
Trap Door long in
the
(
DIA |
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Chart |
News |
PowerRating) above 106.48 that ran to 107 and the 240 EMA. That set up the RST
sell
that re-crossed the 240 EMA, trading down to 106.52. Always a good way to
start
the day. The DIA went sideways from 11:00 a.m. to 1:30 p.m. ET before the
sharp
afternoon trend up into the 107.41 close. (Missed that one.) This afternoon
move
came out of a trading range at the midpoint of the 106.40 low and 107 10:30
a.m.
high. The QQQQ and
(
SPY |
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PowerRating) had similar setups.
On the S&P 500 screen this morning
(commentary
page), you see the housing stocks
(
PHM |
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(
KBH |
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(
CTX |
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PowerRating), +5.0%, right in the top six gainers. I heard the proclamation
yesterday that they are now growth stocks, not cyclical. Kind of sounds like
that “new economy” noise in the dot-com boom. Put them on your
short list, along
with
(
GOOG |
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PowerRating), when this bull cycle heads south. CNBC also dragged out a
so-called market analyst yesterday that I have never heard say a negative
thing
about the market. In fact, he was bullish from the 2000 top all the way
down. I
guess he must have worked with those stock analysts who never uttered the
word
sell on all of those funny money stocks.
The semis did have a good day yesterday and,
obviously, should be a focus for us today, but most of them had
little-more-than-average volume, except for the SMH which traded 36 million
shares vs. its recent 29 million average. The QQQQs traded just under
average
volume, while the SPY volume was +23%.
Early futures are small green, so if there is
early continuation of yesterday afternoon’s up trend, the initial first-hour
trade will be on the short side, but don’t fall in love with your expertise
because the Generals and programs control month-end activity, and they
obviously
prefer up.
Have a good trading day,
Kevin Haggerty
P.S. I will be referring to some charts here:
www.thechartstore.com in the future.