Where The Best Trades Are Generated
What Wednesday’s Action Tells
You
It was a neutral day when you look at the closing
numbers, but that was not the case for daytraders who had an excellent day because
of the way the travel range works out. At day’s end, the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
was only off -0.1%, less than 1.5 points, but it did close in the top 29% of
its range. The volume ratio was neutral at 51, and breadth +57, which is the
eighth positive day in succession since we started to give you this table. The
four-day moving average of the volume ratio is working its way down a bit from
short-term overbought and is now 54, as did the four-day moving average of net
advances minus declines, now +448, down from +803 last Thursday. Key Point:
Most of the time, both the volume and breadth ratios will peak/bottom before
price by one to three days. The 5 RSI is now 59 after hitting 78 on the 1061.44
high day.
| size=2> | size=2> color=#0000ff>Thursday
10/30 |
size=2>Friday
10/31 |
size=2>Monday
11/3 |
size=2>Tuesday |
size=2>Wednesday
11/5 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High | 1052.82. | 1053.09 | 1061.44 | 1059.02 | 1054.54 |
| color=#0000ff>Low | 1043.82 | 1046.94 | 1051.84 | 1051.70 | 1044.88 |
| color=#0000ff>Close | 1046.94 | 1050.71 | 1059.02 | 1053.25 | 1051.81 |
| color=#0000ff>% | -0.1 | +0.4 | +0.8 | -0.5 | -0.1 |
| color=#0000ff>Range | 9 | 6.1 | 9.6 | 7.3 | 9.7 |
| color=#0000ff>% Range | 35 | 62 | 78 | 21 | 71 |
| color=#0000ff>INDU | 9787 | 9801 | 9858 | 9839 | 9821 |
| color=#0000ff>% | +0.1 | +0.2 | +0.6 | -0.2 | -0.2 |
| color=#0000ff>NASDAQ | 1933 | 1932 | 1968 | 1958 | 1959 |
| color=#0000ff>% | -0.2 | -.02 | +1.8 | -0.5 | +0.7 |
| color=#0000ff>QQQ | 35.39 | 35.15 | 35.77 | 35.55 | 35.83 |
| color=#0000ff>% | +0.1 | -0.7 | +1.7 | -0.6 | +0.9 |
| color=#0000ff>NYSE | |||||
| color=#0000ff>T. VOL | 1.62 | 1.40 | 1.36 | 1.34 | 1.36 |
| color=#0000ff>U. VOL | 799 | 763 | 1.02 | 485 | 679 |
| color=#0000ff>D. VOL | 803 | 654 | 318 | 836 | 657 |
| color=#0000ff>VR | 50 | 54 | 76 | 37 | 51 |
| color=#0000ff>4 MA | 64 | 62 | 62 | 54 | 54 |
| color=#0000ff>5 RSI | 64 | 69 | 78 | 62 | 59 |
| color=#0000ff>ADV | 1647 | 1792 | 2270 | 1677 | 1637 |
| color=#0000ff>DEC | 1634 | 1418 | 984 | 1591 | 1590 |
| color=#0000ff>A-D | +13 | +374 | +1286 | +86 | +47 |
| color=#0000ff>4 MA | +803 | +617 | +614 | +440 | +448 |
| color=#0000ff>SECTORS | |||||
| color=#0000ff>SMH | +0.9 | -0.5 | +3.8 | 0 | +1.8 |
| color=#0000ff>BKX | +0.3 | +0.2 | +1.0 | -0.2 | -.02 |
| color=#0000ff>XBD | -0.2 | +0.5 | +1.5 | -0.7 | -0.7 |
| color=#0000ff>RTH | -0.4 | +0.1 | +1.2 | -0.8 | -0.8 |
| color=#0000ff>CYC | +1.2 | 0 | +1.0 | +0.2 | -0.4 |
| color=#0000ff>PPH | -1.0 | +1 | -0.1 | -1.3 | +0.2 |
| color=#0000ff>OIH | +0.5 | +2.4 | -2.0 | +0.4 | +0.9 |
| color=#0000ff>BBH | -0.2 | +0.9 | -1.0 | -0.5 | +0.5 |
| color=#0000ff>TLT | -0.4 | +0.9 | -0.5 | +0.6 | -0.7 |
| color=#0000ff>XAU | -1.8 | +0.5 | -2.1 | +0.8 | +.02 |
For other than daytraders, the best trading
is
generated around the short-term overbought/oversold conditions which you
will
become very good at recognizing as we go along. Right now it is still
short-term
overbought to a lesser degree after backing off from the confluence zone,
but is
only two days down, so don’t roll out the blue short-term position buy
tickets
yet and stay with the daytrading opportunities.
In the major sectors, the
(
SMH |
Quote |
Chart |
News |
PowerRating)s remain
very
overbought and have been rising on declining volume. Yesterday was the
eighth
day of the recent move, which is now +17% from the Oct. 24 low. Despite
closing
in the top of the range yesterday, the SPX still didn’t make it past the
midpoint of the previous day, but does remain above all of its eight-, 20-,
50-
and 200-day EMAs, all of which are rising. There is, however, a negative
divergence still between momentum and the rising major index prices, as we
have
seen.
For Active
Traders
I have included the five-minute SPX chart
today,
which highlights the clearly defined trades for which you were prepared in
advance. (See yesterday’s commentary.) Looking at the chart, you see that
the
previous day’s 1051.70 low was taken out, setting up an RST situation. (See
your
SPY and futures charts.) The hash marks highlight the swing points needed
for
the pattern setup. The 1051.70 low was reversed, which is also a reason to
trade, and then the contra move was on.
Those of you that understand RST had better
confirmation. The contra move was halted just below the previous day’s
midpoint,
hitting the intraday high of 1054.54 and, to no surprise, right at the 10:00
a.m. ET time period. From there, price resumed the direction of the open and
took out the 1051.70 low again and a good second-entry short trade.
Price continued down to make new intraday
lows at
1044.88 on the 10:55 a.m. bar, and we were waiting for it. The .382
retracement
to the 1018.32 low from the 1061.44 high is 1044.97, and the 1.0 volatility
band
yesterday was 1045.34. You got a reversal bar entry above 1045.74, reversing
both the .382 retracement and 1.0 volatility band numbers, and the result
was an
excellent trend trade up to a 1053.47 high, with the SPX closing at 1051.81.
The day may have been neutral at the close,
but
there were three excellent early setups for the daytrader. If you missed the
first three, you definitely shouldn’t have missed the 1,2,3 higher bottom
trade
in the afternoon. I didn’t label it, but if you know the strategy, it’s
clearly
defined.
Regarding pricing for this table, you do
realize
all vendors will have some different prices based on whether the closing
price
is 4:00 p.m. or else if it continues through afterhours. This is in the
index
proxies, HOLDRs and stocks, while the major indices are okay at the 4:00
p.m.
NYSE close. When doing your volume and breadth numbers, wait until the NYSE
runoff is complete and get your numbers after 4:30 p.m. Also, use the NYSE
numbers, not the Composite if you can, even though both will give you trend,
but
this table will use NYSE numbers. An example is the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s last night
closing at 35.63 at 4:00 p.m., then trading up to 35.85 by 4:30 p.m. in the
aftermarket. There are many agendas at day’s end, many of which don’t
involve
the Generals all the time.
As I mentioned in yesterday’s commentary, I
watch
these price and volume divergences at day’s end closely. The SMHs yesterday
rose
1.5%, or 65 cents, from 3:30 p.m. to the after-close of 43.95, and actually,
in
the last five minutes, ran from 43.55 to 43.95. That was obviously activity
in
front of the additional semiconductor news. If you played the SMH RST with
entry
above 42.80, you caught a good piece of that move.
For Today
The futures are early red at 8:15 a.m., but
are
improving, with the S&P now only -3, Dow -24 and Nasdaq -3. Don’t chase
any
early upside, as the SPX has already rallied from the 1044.88 low to 1053.47
yesterday. The best long setups this morning will be
retracements.
Have a good trading day,
Kevin Haggerty
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