When Monday’s Range Gets Resolved, You Already Know The Important Levels To Watch

July 8, 2003
Kevin Haggerty

What Monday’s Market Action Tells You

Yesterday was a trend up day, which I call a 10%
day because there was no contra move after the gap opening. Ninety percent of
the time there is a contra move after a general gap opening, and 60% of the time
price will resume the direction of that gap opening. NYSE volume was 1.38
billion, with a significant amount of volume on the run-off. Price was well
ahead of volume yesterday. The volume ratio was 81 and breadth was +1128.Â

As I mentioned in yesterday’s commentary, the
Nasdaq has traded in a 5.4% box for the past month between 1683 and 1600. 1687
was the 1.618 Fib extension level of the Dec. 2 1521 high to the March 12 1253
low. The Nasdaq Composite took out the 1687 level on the opening bar and never
looked back, closing at 1721.

For Active Traders

It wasn’t a real trader-friendly day, as about
50% of yesterday’s gains were on the opening gaps for the major indices, but the
SPY, for example, did have trade-through entry above its July 3 high of 99.85,
trading to a 100.70 close. The SMH had +2.9% of its gain yesterday on the
opening, while closing at 31.06, which is a new rally high close, but below the
32.47 intraday spike high on June 6. If you didn’t take continuation trades
early, the up moves for the SPX, DIA and Nasdaq were over by 10:30 a.m. ET, then
went sideways for the remainder of the day. The SMHs gave you a flip top entry
above 30.12, and then had a late push up starting at 2:00 p.m.

It is significant to note that during the entire
up move yesterday morning, TRIN was mostly around and below .50, which is very
strong, and breadth above +1000 during that period. That really didn’t change
much even as the major indices went sideways for the remainder of the day. There
were also some bond-to-stock allocation programs yesterday which helped
accelerate price.

Today’s Plan

For today, we start with yesterday’s 3.5 point
Slim Jim for the SPX from 10:00 a.m. to 4:00 p.m., which was essentially 1005.50
to 1002. The .786 retracement to 1015.33 from 962.10 is 1003.94, and yesterday’s
2.0 volatility band was 1003.48, while the SPX closed 1004.42. How that range
gets resolved today will determine the early trading action. As I do this, the
Nasdaq futures are -4, the S&Ps -2, and the Dow -23, so there isn’t that
much going on, but it’s only 7:45 a.m. and lots of time for the game to start
pre-9:30 a.m. NYSE opening.Â

With the Nasdaq and QQQs both making new intraday
and closing highs, along with a new closing high for the SMHs, I would expect
the SPX and Dow to get another push up and maybe bring in the 1,2,3 higher top
scenario outlined in my July 3 commentary. If that happens, you are aware of the
higher awareness levels outlined in yesterday’s AdvancedGET chart.Â

Have a good trading day.

Kevin Haggerty

When Monday’s Range Gets Resolved, You Already Know The Important Levels To Watch

BUY THE FEAR, SELL THE GREED

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