Zones Of Action
It was
a light option expiration Friday, with
NYSE volume declining to 1.4 billion shares, a volume ratio of 54, and breadth
-85. Certainly no conviction from those numbers. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) ended at
+0.6%, SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) +0.6%, and the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +1.2%, led by
some of the bigger cap Nasdaq stocks.
There was a good Trap
Door long trade for the SPX after the early down thrust. The SPX traded down to
866.58, and then re-crossed the 50-day EMA of 869 to the upside, which carried
to the 886.68 intraday high before 11:30 a.m. ET. A 1,2,3 short pattern
developed, but after entry, the SPX only traded down 4 to 5 points to about 877,
then went sideways for the rest of the day forming a big symmetrical triangle
and breaking out of it on the last bar, which essentially means nothing. The
intraday pattern failure is below 878 today. The 50-day EMA pivot trade from a
Trap Door entry was the main action, as many big cap stocks also had good early
reflex moves.Â
The SPX is bumping
against some resistance at 884, which is the .50 retracement to the 1982 low,
and 890 the .618 retracement to 965. If this leg up can reach at least +20% like
the past three bear market rallies, the SPX can, at a minimum, reach the 923
level, which is also the .786 retracement to 965. Whether the pullback comes
from this 884 – 890 zone or the next one higher doesn’t matter much because
we’re ready to take the intraday short setups from defined reversal patterns
only.
On the daily chart,
nothing happens to the downside until the SPX has a Change in Direction day and
also closes below the low of the high day. The important point is that the major
indices have reached a key alert zone after this seven-day move and the week
after option expiration generally has a weaker bias in addition to a major cycle
date. That should be enough to get your attention. In the meantime, we know
where the continuation high levels are if this leg stretches to the +20% to +25%
zone.
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