We Should Get Some Travel Range This Week–Here’s Why
What Friday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) made up Thursday’s
late
program-initiated selloff from 1184 to 1175.61 with a trend up day, closing
at
1184.52, +0.6%. NYSE volume was the lightest of the week at 1.34 billion
shares,
certainly less than you want to see on a plus day. However, the volume ratio
at
72 was the best of the week, as was breadth +1168. Just because NYSE volume
was
lighter on the advance doesn’t mean it is always a negative, especially
after a
short decline and preceding a long holiday weekend as sellers back away and
shorts tuck in positions. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was +0.5% to 10,558, the
Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +0.8% to 2088 and the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) was +1.0% to
38.43.
The semiconductors flip-flopped again with
the
(
SMH |
Quote |
Chart |
News |
PowerRating) +1.4%, and after all the noise the past four days with the
SMH -2.1%,
+2.2%, -1.6% and + 1.4%, the SMH was just -0.3% on the week. That volatility
was
a gift for daytraders. All of the primary sectors were green on Friday, but
the
leaders for the week were the
(
OIH |
Quote |
Chart |
News |
PowerRating), +6.4%, and RTH, +1.3%, while the
(
TLT |
Quote |
Chart |
News |
PowerRating) gained 1.9%.
The most significant thing about last week’s
market action was the improvement in the up volume/down volume ratio and the
same for advances minus declines, despite the decline in price on the week
for
the Dow, -0.4%, SPX -0.2%, and QQQQ -0.2%. The five-day average of up volume
for
the first week in 2005 was only 486 million, with the down volume average at
1.08 billion, or just a 0.45 ratio. The weekly SPX low was 1182.11, and the
breadth ratio was worse at 0.36. Last week with all of the major indices red
on
the week, we saw a definite improvement in those internals. The five-day up
volume average was 740 million and 710 million down for a positive 1.04
ratio.
The five-day average of advances was 1798 and declines 1526 for a 1.2 ratio,
so
there was a definite positive divergence.
For daytraders, Friday was essentially
Flip
Tops
in the SPX above 1180.55 (if you trade futures or SPYs), DIAs above 105.31
and
QQQQ above 38.33. The moves were not big, with the SPX reaching 1185.21, the
DIA
105.65 and QQQQ 38.52. The major indices declined last week to their 15-week
EMAs and minor support levels of the January 2004 highs/high closes. The
QQQQ
closed at 38.43 with the 15-week EMA at 38.32, the DIA 105.44 and 104.68,
having
hit a 104.81 low last week, while the SPX went out the week at 1184.52 with
last
week’s low at 1175.61 and the 15-week EMA just below at 1172.97. There is
also
other confluence at/and just below those levels, so it is a valid price zone
until proven otherwise. Last week was only the second week down, so some
lower
lows next week would not surprise me in week three.
The XLB (basic materials SPDR), which certainly
outperformed the SPX and Dow in this cycle at +89% vs. +58%, closed at 28.92,
but
still 6.0% – 7.0% above any support levels of interest, which are from
27.20 –
27, which includes the 40-week EMA at 27.20. The 15-week EMA is 28.61. I
anticipate this bull cycle Wave 5 for the XLB to end between 30 – 34.75. The
cycle high so far is 30, made into year-end as the Generals were obviously
overweighted in
basics and marked them up into year-end.
Next week is more earnings noise, which is a
good
thing for daytraders as you buy or sell the immediate overreactions. The
homebuilders had another good day on Friday in the focus list stocks, all
breaking out of the same daily chart flag patterns to new highs, and I am
sure,
due in part, to last week’s decline in interest rates. This coming week also
has
the building permits and housing starts reports, so maybe there was some
anticipation built into the move. The CPI and Leading Indicators are also
due
next week, so between those reports and more earnings noise, we should get
some
travel range to work with.
This is being done Saturday for
Tuesday.
Have a good trading day,
Kevin Haggerty