Your Move
After
the morning downturn, we got
the expected contra-trend action I mentioned in Friday’s text after the
Wednesday and Thursday decline. Both the NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) and SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) gave us 11- and 13-bar Slim Jims which were also 1 2 3 entries
above the eight-period moving average of the high. They broke out just after
1:00 p.m., with the NDX running from 1312 to 1353, closing at 1348. The SPX ran
from 1060 to 1076, closing at 1073.
Most of Friday’s stocks
gave you similar moves, like
(
JNPR |
Quote |
Chart |
News |
PowerRating), which was in a 10-bar Slim Jim between
22.50 and 22.20, broke out, hitting a 24 high, closing at 23.65. There were also
Slim Jims in
(
BRCM |
Quote |
Chart |
News |
PowerRating),
(
SMH |
Quote |
Chart |
News |
PowerRating) and
(
CIEN |
Quote |
Chart |
News |
PowerRating), just to name a few.
Looking at the major
indexes, we see that the NDX has so far retraced .38, while the neither the SPX
or
(
$DJX.X |
Quote |
Chart |
News |
PowerRating) has done that yet. The
(
SMH |
Quote |
Chart |
News |
PowerRating)s on the other hand has
retraced 50%, hitting a low of 32.76 on Friday, closing at 34 for a nice
daytrader’s bounce. The SPX has so far been stopped at the 1094 .618 retracement
to the 1187 swing-point high on Aug. 27 and the 50-day EMA of 1101. If this
current rally wants to extend more before any retest, then you should be aware
of the retracement levels to the May 22 1316 high from the 945 low. You can do
those. Also, the 100-day EMA is 1141, and the 200-day EMA is 1201.
The rally from the April
low of 1081 was a 1 2 3 higher bottom. The initial leg was +9.3% from 1081 to
1182, then a retracement to 1092. From 1092 it ran 21% — from 1092 to 1316 —
which was right at the declining 200-day EMA and also to the 2.24 extension of
the initial +9.3% leg, which was 1318. The total rally from 1081 to 1316 was
22%.
Aggressive traders got a
great opportunity from the extreme oversold condition at the 945 level. The
level is stretched out to the third standard deviation band, measured as a
percentage away from a median trendline, while also coming at the nine-month
cycle period, along with a 64-week and two other minor-cycle dates. Not to
mention the extreme oversold condition of the standard indicators, like TRIN,
and the McClellan Oscillator, etc. The 1.618 extension of the 1081 to 1316 leg
measured to 936, so you knew you were in a key alert zone.
So far, this SPX rally
from 945 to 1107 without a retracement is +17%. The low on Friday was 1057, just
above the .38 retracement of 1045 and a decline of 4.5% so far. The Generals
will, as always, decide if we go higher initially to retrace to the 1316 high
before any retracement of the 945 “V” bottom. You have your alert
zones on the downside from Friday’s
table and should be ready to act if you get a Change in Direction pattern
from any of these key alert zones.Â
Going forward, the semis
will continue to be the major sector as the Generals’ perception of a recovery
strengthens. It won’t be fundamental results you read about. Get to know these
stocks on a daily basis regarding their average range, volume, etc. Chips make
it happen, and if the perception is that the worst is over, these stocks will
get airborne again. I don’t put much stock in any daily chart setups that occur
on an Expiration Friday with an afternoon rally, so a suggestion is to take Friday’s
list and be ready either way today. We will let the Generals point the way
today, and we’ll be ready to get on the same train.
Have a good trading day.
Five-minute chart of
Friday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Friday’s NYSE TICKS
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