Will Hedge Funds Make The Generals Pay Up?
The
major indices stalled at the confluence of inflection points after eight days up
and short-term overbought with a
four-day volume ratio average of 74. The market moves in a staircase, as you
know, and our job is to catch the moves early. NYSE volume was 1.5 billion, a
volume ratio of 32, and breadth -588. The SPX [$SPX.X|$SPX.X ] closed at 911.43,
-0.8%, but above yesterday’s 1.0 volatility band of 909.77. The Dow
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finishing at 8440, or -0.9%. The Dow has been the weak sister recently of the
SPX,
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intraday basis, such as long QQQs or SMHs and short
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that spread is often a good intraday play.
The QQQs closed at 27.50,
as the NDX
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just below 27.40 and a double top intraday trend entry is below 27.27. These are
the awareness levels, not absolutes, because entry is always a decision
influenced by your perception of the market dynamics at the moment. The SMHs
closed at 27.20, just above the 60-minute 20-period EMA at about 27.10 with a
1,2,3 lower top trend entry below 26.94.
After the 200-day EMA 905
zone, the SPX has minor support at about 898 to 900, which is the top of the
ascending triangle on the 60-minute chart where it broke out on Tuesday and ran
to a 919.74 new rally high. The .618 retracement to the last swing point low is
899.32. This gives you a quick outline of the near-term downside levels on an
intraday basis.
There is no need to
elaborate on the upside inflection points, as we are well aware of them with
this current rally into the 12-month EMA zone in confluence with the .786
retracement levels. On the daily chart, the eight-day EMA for the SPX is at
about 900 and also above the 20-day EMA, which is about 898, which is in
confluence with the near-term intraday levels mentioned above.
If after some current
retracement the SPX then reverses the 200-day EMA to the upside, it would prompt
the hedge funds to make the Generals pay up for stock, as the positive technical
aspect would accelerate the major indices. There is still lots of institutional
money on the sidelines, especially the pensions still too heavy in their bond
allocation.
This corner started
shorting the
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equity positions at much lower prices. They both won’t keep going up together,
and if there are more bond-to-stock-allocation swaps, it could be a win-win. The
QQQ combo using the January ’04 21 LEAP puts and 28 LEAP calls is in great
shape, obviously, as the QQQ cost is 24 before deducting the combined premium
sold of 4.2 points.
Have a good trading day
and have a great weekend.
Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Thursday’s NYSE TICKS