The Major Trading Edge In The Markets
Enviado: 11/7/2003 17:48TradingMarkets.com
The Major Trading Edge In The Markets
Friday July 11, 9:30 am ET
By Kevin Haggerty
The first attempt at an SPX bounce off the 1.0 volatility band of 993.26 failed, only gaining a point and change before reversing the 1.0 volatility band to the downside for a trend-down day, with the SPX (CBOE^SPXNews) closing at 988.67, -1.3% on the day, same as the Dow, which closed at 9036. The intraday low for the SPX was 983.63 as it traded between 987 and 984 from 1:00 PM until the last 20 minutes. The 2.0 volatility band was 984.32 and the monthly pivot is 984.47. This level stopped the bleeding, but no successful trading reflex from the zone was in the cards.
NYSE volume was 1.43 billion, volume ratio of just 17 and breadth -1277. The Nasdaq (NasdaqSC^IXICNews) ended -1.8% at 1716, and the QQQs (AMEXQQQNews) were -2%, closing at 31.57.
The major sectors were red all day, with the OIHs reversing the previous day's gains, declining 3%; the SMH was -2.4; XBD -3%; CYC -1.7%, and RTH -1.3%
The most significant thing about yesterday's market action was the absolute increase in volume in the SPY and QQQs. I said in the July 9 commentary that I didn't like rising prices and declining volume, a scenario that precedes a change in direction. You can't know the duration, but you know it's always a red alert for traders. The QQQs traded 20% more than the average volume, as did the SPYs.
There was no real sector thread that stood out on the S&P 500 screen today, other than the lack of volume relative to their averages in many of the semis, such as Novellus (NasdaqNMNVLSNews), QLogic (NasdaqNMQLGCNews), Microchip (NasdaqNMMCHPNews) , Xilinx (NasdaqNMXLNXNews), and Texas Instruments (NYSETXNNews). There was an increase, however, in some, such as MXIM, which traded about double its average volume, Micron trading +55% more volume and Intel +45%.
Certainly no surprise that they're ringing the register on Micron, which was up 30% low to high in six days; Intel is +20% in nine days, while MXIM has gained 15% in four days. Stocks climb staircases, not firepoles.
Some traders played the Flip Top to the downside yesterday in either the E-Minis, SPY or QQQs, but after that it was just continuation shorts as there was no real profitable bounce until about 2:00 PM when the S&P E-minis rallied from 982 to 989.25, closing at 987.50. The QQQ trailed and reflexed up from an intaday low of 31.33 to 31.63, then closing then closing at 31.57.
Nothing has changed in my estimation that the SPX could stay in sync with its cycle over the past year, which means a high probability of a decline going into early to mid August. See my May 30 and June 17 commentaries. To prepare for this, options strategies were initiated and of course the synthetic straddle adjustments have kicked in on both the upside run to 1010.33 and then yesterday -- which was excellent -- with the SPX minus 17 points at one point. That two-way volatility was an excellent way to start the trade. The strategy was put on against longer-term index proxy positions at lower prices. It's just the more aggressive approach, which takes advantage of extended moves like the current one with the major indices once again bumping up against those extended volatility band zones. The greater fools on the buy side seem to run out of money at these zones on the upside, and the sellers out of stock on the downside extended zones. To me, that is the major trading edge in the markets, regardless of your time frame. See the July 3 commentary.
Coming into today, we see that the SPX closed at 988.70, just above 988.21, which is the 20-day EMA so that is the initial pivot for today's game. The Qs closed at 31.60, with the 20-day EMA at 30.73. The SMH's are the most extended, closing at 31 with the 20-day EMA down at 29.67, with its 8-day EMA at 30.44. If there is a downside carry-through today, look to the combination of the 20-day EMA and today's volatility bands for possible intraday reversals.
On the short side, yesterday's late reflex up put the index proxies and the SMHs close to their declining longer term intraday EMAs, so depending on how the opening game plays out, these levels become the retracement short zones.
I am referring to both the "820" and "523" Trend Identification Methods, which are taught at the seminar and included in the current video.
Have a good weekend,
Kevin Haggerty
The Major Trading Edge In The Markets
Friday July 11, 9:30 am ET
By Kevin Haggerty
The first attempt at an SPX bounce off the 1.0 volatility band of 993.26 failed, only gaining a point and change before reversing the 1.0 volatility band to the downside for a trend-down day, with the SPX (CBOE^SPXNews) closing at 988.67, -1.3% on the day, same as the Dow, which closed at 9036. The intraday low for the SPX was 983.63 as it traded between 987 and 984 from 1:00 PM until the last 20 minutes. The 2.0 volatility band was 984.32 and the monthly pivot is 984.47. This level stopped the bleeding, but no successful trading reflex from the zone was in the cards.
NYSE volume was 1.43 billion, volume ratio of just 17 and breadth -1277. The Nasdaq (NasdaqSC^IXICNews) ended -1.8% at 1716, and the QQQs (AMEXQQQNews) were -2%, closing at 31.57.
The major sectors were red all day, with the OIHs reversing the previous day's gains, declining 3%; the SMH was -2.4; XBD -3%; CYC -1.7%, and RTH -1.3%
The most significant thing about yesterday's market action was the absolute increase in volume in the SPY and QQQs. I said in the July 9 commentary that I didn't like rising prices and declining volume, a scenario that precedes a change in direction. You can't know the duration, but you know it's always a red alert for traders. The QQQs traded 20% more than the average volume, as did the SPYs.
There was no real sector thread that stood out on the S&P 500 screen today, other than the lack of volume relative to their averages in many of the semis, such as Novellus (NasdaqNMNVLSNews), QLogic (NasdaqNMQLGCNews), Microchip (NasdaqNMMCHPNews) , Xilinx (NasdaqNMXLNXNews), and Texas Instruments (NYSETXNNews). There was an increase, however, in some, such as MXIM, which traded about double its average volume, Micron trading +55% more volume and Intel +45%.
Certainly no surprise that they're ringing the register on Micron, which was up 30% low to high in six days; Intel is +20% in nine days, while MXIM has gained 15% in four days. Stocks climb staircases, not firepoles.
Some traders played the Flip Top to the downside yesterday in either the E-Minis, SPY or QQQs, but after that it was just continuation shorts as there was no real profitable bounce until about 2:00 PM when the S&P E-minis rallied from 982 to 989.25, closing at 987.50. The QQQ trailed and reflexed up from an intaday low of 31.33 to 31.63, then closing then closing at 31.57.
Nothing has changed in my estimation that the SPX could stay in sync with its cycle over the past year, which means a high probability of a decline going into early to mid August. See my May 30 and June 17 commentaries. To prepare for this, options strategies were initiated and of course the synthetic straddle adjustments have kicked in on both the upside run to 1010.33 and then yesterday -- which was excellent -- with the SPX minus 17 points at one point. That two-way volatility was an excellent way to start the trade. The strategy was put on against longer-term index proxy positions at lower prices. It's just the more aggressive approach, which takes advantage of extended moves like the current one with the major indices once again bumping up against those extended volatility band zones. The greater fools on the buy side seem to run out of money at these zones on the upside, and the sellers out of stock on the downside extended zones. To me, that is the major trading edge in the markets, regardless of your time frame. See the July 3 commentary.
Coming into today, we see that the SPX closed at 988.70, just above 988.21, which is the 20-day EMA so that is the initial pivot for today's game. The Qs closed at 31.60, with the 20-day EMA at 30.73. The SMH's are the most extended, closing at 31 with the 20-day EMA down at 29.67, with its 8-day EMA at 30.44. If there is a downside carry-through today, look to the combination of the 20-day EMA and today's volatility bands for possible intraday reversals.
On the short side, yesterday's late reflex up put the index proxies and the SMHs close to their declining longer term intraday EMAs, so depending on how the opening game plays out, these levels become the retracement short zones.
I am referring to both the "820" and "523" Trend Identification Methods, which are taught at the seminar and included in the current video.
Have a good weekend,
Kevin Haggerty