One Of These Two Scenarios Will Play Out
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One Of These Two Scenarios Will Play Out
TradingMarkets.com
One Of These Two Scenarios Will Play Out
Thursday July 3, 10:14 am ET
By Kevin Haggerty
What Wednesday's Market Action Tells You
Yesterday's market action had a little bit of everything as some new money continues to get put to work after the Generals took prices up into the quarter ending June 30. It was obviously thin yesterday, as some individual stock prices got pushed around on much less than their normal average volume, which is not unusual prior to a holiday that coincides with new quarter money being invested, and maybe some shorts also had to scramble. NYSE volume was 1.4 billion and volume ratio 81 for a three-day moving average of 65 and short-term overbought. Breadth was +1695. The SPX (CBOE^SPXNews) and Dow (CBOT^DJINews) both gained +1.1%, while the Nasdaq (NasdaqSC^IXICNews) was +2.3%, and the QQQs (AMEXQQQNews) +2.1%. Financials and basics were in line with the SPX. The Biotech HOLDRs (AMEXBBHNews) and Semiconductor HOLDRs (AMEXSMHNews) were both +2.2%.
Some of the stocks that had set up on Wednesday and were in yesterday's commentary had excellent moves as the "game was on" regarding price. AVID broke out of a 22-day box between 38 and 33 to new highs, gaining +8.9% and giving you trade-through entry above 36.90. You can't know when they will come, but if prepared in advance, you can be ready to ride the train when they do, as in yesterday. The breakout was on about double its average volume. MERQ made a good run, gaining +4.3% on a small gap opening above the previous day's high of 40.24. Yesterday's low was 40.46.
Cypress Semi (NYSECYNews) was the best of our semis at +4.9% and good trade-through entry, but it was on -21% less than its normal average volume. I should point out that the SMHs advanced +2.2%, but it was on -32% less than its normal volume, which highlights how thin it was yesterday. KLA-Tencor (NasdaqNMKLACNews) was a market performer at just +1.0%, but also on -23% less volume. Novellus (NasdaqNMNVLSNews) had an empty suit analyst take a swipe at it and declined -1.5%, not on any increase in volume, and in fact, traded 11% less than its average volume. QLogic (NasdaqNMQLGCNews) was +1.7% on -23% less volume, while Synopsys (NasdaqNMSNPSNews) was +1.3% on 56% less volume.
The lows for the major indices yesterday were on the opening bar, and it was trend-up from there with a late price move bolstering the indices from 2:15 PM into the 4:00 PM close. The QQQ traded 82 million shares, which is right on its recent average volume number, but that was not the case for the SPDRs (AMEXSPYNews), with 20% less than its normal volume and the Diamonds (AMEXDIANews) which traded 45% less than its average volume. These numbers also highlight the price and volume disconnect yesterday.
A look at the current rally from the last primary low, we see that the SPY has advanced 29% from the March 12 low and has retraced just 5.6% of that move, which is a Fib percentage retracement of only 19%. The QQQs have advanced +39% from the February 10 primary low, then declined 10%, which is 25% of the entire rally. The SMH -- which has led the rally -- has gained 59% since the February 13 last primary low and have retraced 15%, which is also 25% of the entire 59% rally.
Here Are The Levels
The +3.3% bounce for the SPX was from our first awareness level, which is the confluence of numbers from 960-963, which included the longer-term head and shoulders neckline drawn from the 1998 low. The retracement to 962 broke the trendline from the March 12 bottom with four closes below the line, which is not significant to regular market investors, as price is well above all rising longer-term moving averages, so they just continue to ride. However, it is significant to aggressive market participants who play both sides of the market or who want to protect some excellent gains, having gotten in at lower prices when the media and empty suits they parade in front of you daily wanted no part of it.
One of two things will happen: 1) The retracement to the 1015.33 rally high of the SPX will be a 1,2,3 lower top or 2) the decline to 962 was the fourth leg of the move of the March 12 789 low and any new highs above 1015.33 will be the fifth leg, setting up an RST reversal sell pattern or else a 1,2,3 higher top if price is not too far above 1015.33.
The .618 retracement of 1015.33 from 962.10 is 995. The .768 retracement is 1003.94, and the 1.27 Fib extension of the primary leg down from 954.28 to the 788.90 March 12 low is 998.93. The SPX closed at 993.76, so price has entered the zone, which means traders are ready to play any good short side intraday setups that get extended. That covers the potential 1,2,3 lower top. If the SPX makes new highs above 1015.33, then I look to the 1024 level first and then the 1.618 extension of that same primary leg is 1056.48.
This corner has initiated options strategies to protect on the downside and also a delta neutral synthetic because there could be some good two-way action in here because major indices are at the crossroads of either a 1,2,3 lower top or a 1,2,3 higher top and new rally highs. These kinds of trades are best put on when volatility is low, as it is now.
For Longer-Term Investors
The regular longer-term investor who is usually either long the S&P 500 index funds or in money market funds can just watch the rising 12-month EMA -- which is now 945 -- as your downside alert decision level, which by the way, can be an add-to position or else a switch back to money market funds, depending on how price reacts at that level, which is obviously dynamic and changes daily according to price.
Today's Plan
Today's plan of action is simply to finish this, watch the 9:30-10:30 time period for any no-brainers, then head to the beach and let you play around with the half-day market which closes at 1:00 PM. There will be just a quick column on Monday, but I will include some charts that will frame what I discussed today, which will help you anticipate future decisions and levels.
Have a great holiday.
Kevin Haggerty
One Of These Two Scenarios Will Play Out
Thursday July 3, 10:14 am ET
By Kevin Haggerty
What Wednesday's Market Action Tells You
Yesterday's market action had a little bit of everything as some new money continues to get put to work after the Generals took prices up into the quarter ending June 30. It was obviously thin yesterday, as some individual stock prices got pushed around on much less than their normal average volume, which is not unusual prior to a holiday that coincides with new quarter money being invested, and maybe some shorts also had to scramble. NYSE volume was 1.4 billion and volume ratio 81 for a three-day moving average of 65 and short-term overbought. Breadth was +1695. The SPX (CBOE^SPXNews) and Dow (CBOT^DJINews) both gained +1.1%, while the Nasdaq (NasdaqSC^IXICNews) was +2.3%, and the QQQs (AMEXQQQNews) +2.1%. Financials and basics were in line with the SPX. The Biotech HOLDRs (AMEXBBHNews) and Semiconductor HOLDRs (AMEXSMHNews) were both +2.2%.
Some of the stocks that had set up on Wednesday and were in yesterday's commentary had excellent moves as the "game was on" regarding price. AVID broke out of a 22-day box between 38 and 33 to new highs, gaining +8.9% and giving you trade-through entry above 36.90. You can't know when they will come, but if prepared in advance, you can be ready to ride the train when they do, as in yesterday. The breakout was on about double its average volume. MERQ made a good run, gaining +4.3% on a small gap opening above the previous day's high of 40.24. Yesterday's low was 40.46.
Cypress Semi (NYSECYNews) was the best of our semis at +4.9% and good trade-through entry, but it was on -21% less than its normal average volume. I should point out that the SMHs advanced +2.2%, but it was on -32% less than its normal volume, which highlights how thin it was yesterday. KLA-Tencor (NasdaqNMKLACNews) was a market performer at just +1.0%, but also on -23% less volume. Novellus (NasdaqNMNVLSNews) had an empty suit analyst take a swipe at it and declined -1.5%, not on any increase in volume, and in fact, traded 11% less than its average volume. QLogic (NasdaqNMQLGCNews) was +1.7% on -23% less volume, while Synopsys (NasdaqNMSNPSNews) was +1.3% on 56% less volume.
The lows for the major indices yesterday were on the opening bar, and it was trend-up from there with a late price move bolstering the indices from 2:15 PM into the 4:00 PM close. The QQQ traded 82 million shares, which is right on its recent average volume number, but that was not the case for the SPDRs (AMEXSPYNews), with 20% less than its normal volume and the Diamonds (AMEXDIANews) which traded 45% less than its average volume. These numbers also highlight the price and volume disconnect yesterday.
A look at the current rally from the last primary low, we see that the SPY has advanced 29% from the March 12 low and has retraced just 5.6% of that move, which is a Fib percentage retracement of only 19%. The QQQs have advanced +39% from the February 10 primary low, then declined 10%, which is 25% of the entire rally. The SMH -- which has led the rally -- has gained 59% since the February 13 last primary low and have retraced 15%, which is also 25% of the entire 59% rally.
Here Are The Levels
The +3.3% bounce for the SPX was from our first awareness level, which is the confluence of numbers from 960-963, which included the longer-term head and shoulders neckline drawn from the 1998 low. The retracement to 962 broke the trendline from the March 12 bottom with four closes below the line, which is not significant to regular market investors, as price is well above all rising longer-term moving averages, so they just continue to ride. However, it is significant to aggressive market participants who play both sides of the market or who want to protect some excellent gains, having gotten in at lower prices when the media and empty suits they parade in front of you daily wanted no part of it.
One of two things will happen: 1) The retracement to the 1015.33 rally high of the SPX will be a 1,2,3 lower top or 2) the decline to 962 was the fourth leg of the move of the March 12 789 low and any new highs above 1015.33 will be the fifth leg, setting up an RST reversal sell pattern or else a 1,2,3 higher top if price is not too far above 1015.33.
The .618 retracement of 1015.33 from 962.10 is 995. The .768 retracement is 1003.94, and the 1.27 Fib extension of the primary leg down from 954.28 to the 788.90 March 12 low is 998.93. The SPX closed at 993.76, so price has entered the zone, which means traders are ready to play any good short side intraday setups that get extended. That covers the potential 1,2,3 lower top. If the SPX makes new highs above 1015.33, then I look to the 1024 level first and then the 1.618 extension of that same primary leg is 1056.48.
This corner has initiated options strategies to protect on the downside and also a delta neutral synthetic because there could be some good two-way action in here because major indices are at the crossroads of either a 1,2,3 lower top or a 1,2,3 higher top and new rally highs. These kinds of trades are best put on when volatility is low, as it is now.
For Longer-Term Investors
The regular longer-term investor who is usually either long the S&P 500 index funds or in money market funds can just watch the rising 12-month EMA -- which is now 945 -- as your downside alert decision level, which by the way, can be an add-to position or else a switch back to money market funds, depending on how price reacts at that level, which is obviously dynamic and changes daily according to price.
Today's Plan
Today's plan of action is simply to finish this, watch the 9:30-10:30 time period for any no-brainers, then head to the beach and let you play around with the half-day market which closes at 1:00 PM. There will be just a quick column on Monday, but I will include some charts that will frame what I discussed today, which will help you anticipate future decisions and levels.
Have a great holiday.
Kevin Haggerty
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Figas
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