Without Chips, Bull Cycle Ends Sooner Than Later
What Thursday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) was +7.9 points to
1191.63 on the 2:20 p.m. ET bar, but faded to close at 1187.88, +0.4%,
reversing
Wednesday’s -0.4% day. NYSE volume was still to the high side (relative) at
1.57
billion shares with the volume ratio improving to 62 while the 4 MA is still
low
at 30. Breadth was only +491, so volume was concentrated in fewer stocks,
and
that is not good market action. The breadth 4 MA is still oversold at -1061.
The
Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was +0.2% to 10,623, but there was a negative divergence
with
the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) losing a point to 2090 and the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) -0.5%
to
38.35, closing on the lows. This is another negative market action. The
QQQQs
were dragged down again by the
(
SMH |
Quote |
Chart |
News |
PowerRating) at -0.5% having declined for the
sixth
day in succession and -7.3% over this period. The analysts can downplay the
techs/semis all they want, but it is still all about Chips, and the semis
must
participate if they think 2005 is not the end of the current cycle. My
observations are well documented on that scenario.
The brokers had a lift with the XBD +1.3%
after
three days down at -3.9%. The CYC and BKX were green, in line with the SPX
+0.4%. The
(
OIH |
Quote |
Chart |
News |
PowerRating) re-crossed the 50-day EMA, closing at 83.03, +2.2%.
The SPX ranged out after the initial two bars
up
on the opening to an 1187.44 high, then faded, taking out Wednesday’s low of
1183.74. The low was 1183.23 with an inside-bar doji pattern and then
reversed
the previous 1183.74 low, trading up to 1191.63. The
(
SPY |
Quote |
Chart |
News |
PowerRating) made a 118.37
low, trading down from 118.70 before reversing to the intraday high of
119.15
and fading to close at 118.61. If you felt as I did about the short-term
oversold condition going into yesterday and the key price zone for the SPY,
etc., you caught the move. If you carried some over from Wednesday’s 118
low,
you did even better.
Individual stocks have been the core of this
week’s daytrading action as the SPX has been ranging out between 1192.75 –
1183.23 since Tuesday’s 1185.39 low. The three SPX highs during this period
have
been 1192.58, 1192.75 and 1191.63 yesterday, so we know where the SPX gets
space. For the SPY, it would be above 119.24 with the 240 EMA (five-minute
chart) at 119.15 starting today’s trading.
The “Above the Line” stock
selection method
continues to provide excellent daytrading opportunities, especially on
retracements from recent rally highs. Two examples from yesterday are the
(
BBH |
Quote |
Chart |
News |
PowerRating) and
(
GENZ |
Quote |
Chart |
News |
PowerRating), both retracements to their 20-day EMAs. (See
today’s
charts.)
It is the first Friday of the month, and we
have
that “jobs dance” this morning and maybe some volatility which
will create
opportunity for the daytrader. Seeing that it is a short-term oversold
condition, the better reaction for the daytrader would be a
Trap Door down
to
set up the long side at lower levels.
Have a good trading day,
Kevin Haggerty
