Why Your Journey Starts Today
What Monday’s Action Tells You
It was an opening gap up for the major indices
that led to an intraday high of 1037.75 for the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) on the 10:10
a.m. ET bar. The day was over right there, and it was downside drift into the
close. The SPX,
(
QQQ |
Quote |
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News |
PowerRating)s and Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) were +0.2% and +0.3%, with the
Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +0.9%. Major sectors outperforming indices were the XBD,
+1.5%, and the
(
SMH |
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PowerRating) and
(
RTH |
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Chart |
News |
PowerRating) both +1.0%.
NYSE volume at 1.35 billion shares was the lowest
of the past six days. The volume ratio yesterday was positive at 64, but the SPX
did close in the bottom 25% of its range. Most of the positive volume was in the
first 45 minutes, and the downward drift in price was on obvious declining
volume. (See your five-minute chart.) The four-day volume ratio is nondescript
at 43, as is breadth which was positive yesterday at +1118, but with a four-day
moving average of just -186.
It has been a holding action for three days after
the wide-range bar down last Wednesday for the SPX on 1.6 billion shares. The
last three days’ price action has been between the 20-day EMA, now 1033.61, and
the 50-day EMA below at 1021.60, with the exception, of course, of the excellent
1,2,3 double bottom trade from the 1018 zone on Friday.
For Active Traders
Today starts your journey to develop your skills
and being able to read the objective message that the market is giving you at
all times. Good trade selection is definitely better when you have a handle on
the primary mover of stocks, which is the general market direction. You must
know if price and volume are in sync. Does breadth support the move? Is it a
broad advance across all major sectors? What are the obvious divergences? And is
it short-term oversold or overbought, or is it just neutral, as it is after
yesterday’s action?
Monday 10/27 |
Tuesday 10/28 |
Wednesday 10/29 |
Thursday 10/30 |
Friday 10/31 |
Net |
|
Index |
||||||
SPX |
||||||
| High | 1037.75 |
|||||
| Low | 1028.90 |
|||||
Close |
1031.13 |
|||||
| % | +.2 | |||||
Range |
8.85 | |||||
| % Range |
25 | |||||
INDU |
9608 | |||||
| % | +0.3 | |||||
NASDAQ |
1883 | |||||
| % | +.9 | |||||
QQQ |
34.25 | |||||
| % | +0.2 | |||||
NYSE |
||||||
| T. VOL |
1.35 | |||||
| U. VOL |
861 | |||||
| D. VOL |
484 | |||||
| VR | 64 | |||||
| 4 MA | 43 | |||||
| 5 RSI |
39 | |||||
| ADV | 2168 | |||||
| DEC | 1050 | |||||
| A-D | +1118 | |||||
| 4 MA | -186 | |||||
SECTORS |
||||||
| SMH | +1.0 | |||||
| BKX | -0.4 | |||||
| XBD | +1.5 | |||||
| RTH | +1.0 | |||||
| CYC | +0.7 | |||||
| PPH | 0 | |||||
| OIH | -0.4 | |||||
| BBH | -0.9 | |||||
| TLT | -0.2 | |||||
| XAU | +0.5 |
The table in today’s commentary starts with
yesterday’s trading, and I will include a permanent table explanation tomorrow
which will define the contents. The table starts with the index section which
has the actual high, low and closing prices for the SPX and its percentage move
for the day. The INDU, which is the Dow Jones 30, is rounded off in closing
price, as is the Nasdaq. The QQQs, like the SPX, has the actual price. After
that is the actual SPX daily range for that day and the percentage of the range
that price closed, both extremely important. The closing price relative to the
range tells you much about the supply and demand for that day’s trading.
Next, the table moves to the key NYSE statistics
that will enable you to determine the objectivity of what the market is saying.
In today’s table, you’ll see that total volume was 1.35 billion shares vs. up
volume of 861 million and down volume of 484 million, just to point out how the
numbers are read. The volume ratio is 64, and the calculation will be included
in the table explanation tomorrow. Next, you have the five-day RSI which I use
in confirmation with price, volume and breadth to determine short-term oversold
and overbought.
Lastly, you have the percentage moves that day
for the major sectors. I prefer to use the HOLDRs as proxies where possible
because that is what you trade. I don’t do that with the SPX and Dow because
those prices are certainly more visible daily than the SPY or DIA. I use the QQQ,
which is the NDX 100 proxy, simply because how often do you use the actual NDX
100 index price in your vernacular, and the QQQs are the most liquid HOLDR.
How to use the table and relate it to the market
action and tendencies will be a daily education process. I will go lightly this
week so you can get a feel for the numbers in relation to what you think you
see, or worse yet, what you hear from the empty suits. The goal is for you to be
able to interpret the market action with an objective and non-biased eye.
The early opening gap for the major indices
yesterday led to the best trade opportunity of the day. The SPX traded up to a
1037.75 intraday high on the 10:10 a.m. bar. This was a confluence zone which
included the 1.0 volatility band yesterday at 1037.17, the .618 retracement to
the most recent swing point high of 1048.52 last Tuesday, which is 1037. The
primary swing point high is the 1053.79 high on Oct. 15, and the .50 retracement
to that high from the 1018 double bottom is 1036.05. The .618 retracement to
1053.79 is just above at 1040.24, and the two-day volatility band from the
1018.32 actual low was 1041. (I will explain this in future commentary about how
you use other than closing price to determine extended volatility band levels.)
SPX entry was either below the inside bar pattern
low of 1036.31, and for sure on the reversal of the last five bars’ low below
1035.39. You would have traded either the SPY or E-mini. The obvious E-mini
entry was below 1034, which was also below the last four bars’ lows. (Check your
five-minute chart to see the entries.)
For Today
The futures are early green at 8:00 a.m., with
the Dow +260, the Nasdaq +26, and S&Ps +5. For the rest of this week, it’s just
a game of reaction each day for daytraders to what the Generals do at the month
end. So far they have held price well, as the worst case has been a -3.4%
pullback from 1053.79 to 1018.32 which is now back up to yesterday’s close of
1031.13.
Have a good trading day,
Kevin Haggerty
