Zone
The
SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) went south again, giving
up 2.7%. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was -1.6%, NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) -3.3%, and
Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) -2.9%. It was another Change In Direction day which
closed below the previous day’s low and in the bottom of the range. But more
importantly, it was a new closing low in this downward spiral. That makes
Wednesday another lower swing point high. In fact, there hasn’t been more than
two up days after each low reversal day since May, when there was an eight-bar
retracement up to 1107. NYSE
volume was 1.7 billion, a volume ratio of 20, and breadth ugly at -1124.
Taking inventory for the
last five days, we see that the Dow is down 392 points, SPX -5.0%, Nasdaq -1.1%
and NDX 100 just -0.2%. The SOX
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) is -0.7% over that time frame,
and we also saw the
(
SMH |
Quote |
Chart |
News |
PowerRating)s rally 20% in five days, as there was a positive
divergence in technology as also evidenced by the NDX and Nasdaq.
All of the much discussed
overbought/oversold indicators are close to September low readings, so there is
nothing in that arena that is not known. For example, NYSE stocks greater than
their 200-day MA is now down to 33%, levels where we have had excellent reflex
rallies in the past. In fact, there are no stocks in the Dow greater than their
200-day MA, and only about 5.0% of SPX stocks and the same for the NDX 100. The
five-day volume ratio is just 37, and the advance/decline five-day average is
-678. Reflex numbers are certainly in the go zone.
We had two new closing
lows yesterday for the SPX and DJX, but the NDX has positively diverged to this
point and is in a 19-day trading range and has not made a new closing low yet.
My favorite vehicle, the SMHs, are in the same length trading range as the NDX.
Is this an early warning along with the bundle of oversold numbers for a reflex
up to test the shorts? We will get the answer quickly. Oftentimes, after
persistent declines like we are now in, the market must go higher before it goes
lower. If there is another air pocket over the next few days, that would set up
a better opportunity for a reflex. In spite of all of the intraday volatility,
we continue to get defined patterns both long and short, so the strategy remains
the same.
Keep your helmets on. Have a good trading
day and a great weekend. See you on Monday.
Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Thursday’s NYSE TICKS