Why The Generals Could Come in Today
Although the NYSE volume was only 1.1 billion,
the tone of the market was excellent and
volume one-sided, with the volume ratio at 87 and breadth +1430. I wouldn’t
expect the Generals to be heavy on the sell side following the significant
change in Iraq. On the day, the SPX
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and brokers were +2.1% and +3.3%, while the retail was +1.9% and the drugs
+2.1%. The
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The SPX came out of the
closing range triangle mentioned in yesterday’s commentary with a strong opening
bar, then consolidated in a rising wedge/symmetrical triangle. Prior to the
breakout of this triangle above 873, you could see the dynamics improving. The
volume ratio and breadth were improving, as you saw the TRIN decline below 1.0,
and then below .90 prior to the breakout. This consolidation was right at the
240 EMA on your five-minute chart, so the breakout was above all of the 8, 20,
60 and 240 EMAs. It felt good to see the market dynamics determining direction,
and not the next piece of war news creating a knee-jerk reaction in the futures.
The breakout on the
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you got a second chance on a pullback to the 20-period EMA, which gave you
another opportunity with entry above 87.66. The SPY traded up to an 88.95 close,
right at the top of the daily range. These were first consolidation breakouts,
and not opening reversals for both the SPY and
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the opening bar were too far above the open.
The SPX closed 885.23,
which was also above its 1.0 volatility band of 878.26, and this most often
means a further move in the same direction. The close below the 867.11 1.0
volatility band on April 9 only declined to 862.76 before turning up. Maybe that
should be telling us something. 863 is the .618 retracement to the 1994 low.
The last two moves into
resistance gave us a negative divergence, with the Dow making a March 21 high of
8522.18 and a lower high of 8520.21 on April 7. The SPX had made an 895.90 high
on March 21, and then a higher high of 904.89 on April 7, which was the
celebration for the significant Iraq positive news on that Monday. They pushed
the futures hard that day, but the SPX’s higher high stood alone, as the QQQs
also gave us a negative divergence with a March 21 high of 27.76 and then a
27.20 high on April 7. This tells me that the 8522.18, 895.90 and 27.76 highs
are the key near-term magnets.
With all of the industry
indices green yesterday, except gold and the OIHs, as to be expected, there is
an early carryover this morning, as I see the S&P futures +6, Dow +57 and Nasdaq
+9. Yesterday’s better tone could bring in the Generals today on the buy side.
Based on the Iraq developments, this seems to be the best opportunity for the
major indices to make a move up to, or through, the upper end of resistance. The
200-day EMA for the SPX is now 905.79, and the 12-month EMA is at about 915.
The Slim Jim for the SPX
yesterday between 882 and 879 from 1:00 p.m. ET until the breakout on the 3:35
p.m. bar, becomes near-term downside support after any early opening move. See
your five-minute chart.
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS