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In Friday's text, I expected a reflex bounce, as the NDX ($NDX.X | Quote | Chart | News | PowerRating) was short-term oversold in addition to new monies and the re-buying of a percentage of the dogs the Generals blew out into month-end. I also said that the option activity was extremely negative which would help ignite any reflex bounce. Then I said that the (SMH | Quote | Chart | News | PowerRating)s had closed below the lower boundary of the 3 1/2 month box, along with Intel's (INTC | Quote | Chart | News | PowerRating) ugly chart. There were also other semi charts, like Qlogic (QLGC | Quote | Chart | News | PowerRating), which confirmed the SMHs and INTC. It certainly looked as if the bears' semi analyst contingent was dominating the hype battle. With these charts, the shorts were all over them, and many traders were very happy with their various shorts after Thursday's action. What I didn't say in the text was that the reflex was going to be a moonshot with a semi explosion. Maybe I should have checked and would have seen that it was also a full moon.
Needless to say, the semis exploded as Novellus (NVLS | Quote | Chart | News | PowerRating) said a few good words and was up 14% on 78% more than its average volume, in addition to the economic reports that came out. (MXIM | Quote | Chart | News | PowerRating) gained 10.8% on 39% more volume, along with (KLAC | Quote | Chart | News | PowerRating), +10.9% on +32% volume, with (AMAT | Quote | Chart | News | PowerRating) +10.4% on 30% more than its average volume.
The squeeze in price was highlighted more by QLGC at +16% on just 23% more volume and INTC +8.5% on just 18% above its average volume. They were reaching to extreme in price because sellers were nowhere to be found. If you look at today's NDX 100 screen, you will also see many stocks that were price strong and volume light for the same reasons. Suffice to say, the four tight closes on the SPX ($SPX.X | Quote | Chart | News | PowerRating) were resolved and the techs advanced, rather than Dow ($INDU | Quote | Chart | News | PowerRating) coming back. Techs like INTC, (IBM | Quote | Chart | News | PowerRating) and (MSFT | Quote | Chart | News | PowerRating) were key parts of the big Dow gain of +2.6%. The SPX rose +2.3%, while the NDX finished +5.6%. The story, however, is the ($SOX.X | Quote | Chart | News | PowerRating) which gained 11.0%, and that's not what I call working lower, as I also had said in the previous text.
NYSE volume was only slightly more than the last two days at 1.4 billion, a volume ratio of 77, with breadth extremely positive at +1295. The NDX volume ratio was powerful at 86, and the Nasdaq at 79. NYSE stocks trading above their 200-day EMA is now 62%. This price explosion ignites greed and also forces money into the market by many money managers that are long too much cash and are afraid of missing the train. I, for one, will be surprised if the NDX .618 retracement to the September low is the bottom without the Dow and SPX retracing more than the .38 that they have so far. If that further retracement doesn't happen, the next leg up would be very strong, with just the .38 retracement.
The Nasdaq closed at 1802.74, right on the 1800 resistance. The SPX closed at 1131.78 vs. the .50 retracement level of 1130.34 and the 30-week EMA at 1136.94. On the Dow, after the 246 point explosion, I see that the Dow volume was less than the previous day, which was down 25 points. Very strange.
Stocks Today
Stay away from first entry on any continuation longs. Let any opening reaction play out. The 3:35 p.m. surge on Friday was accelerated by programs, and it lifted the NDX 17 points, the SPX 7 points, and the Dow 60 points. This is more reason to stay away from playing the longside on or near the opening. Let the emotions play out.
Daily chart long setups are (EXPE | Quote | Chart | News | PowerRating), (FISV | Quote | Chart | News | PowerRating), (GILD | Quote | Chart | News | PowerRating), (IDPH | Quote | Chart | News | PowerRating), (BAC | Quote | Chart | News | PowerRating), (WFC | Quote | Chart | News | PowerRating), (PX | Quote | Chart | News | PowerRating), (DD | Quote | Chart | News | PowerRating), (ADBE | Quote | Chart | News | PowerRating), (INTU | Quote | Chart | News | PowerRating), (USAI | Quote | Chart | News | PowerRating), (MU | Quote | Chart | News | PowerRating), (BRCM | Quote | Chart | News | PowerRating), (DPMI | Quote | Chart | News | PowerRating), (LTXX | Quote | Chart | News | PowerRating), (MRVL | Quote | Chart | News | PowerRating) and (LRCX | Quote | Chart | News | PowerRating).
Any sustained move will include the major brokerage stocks, so focus on them intraday, and also defensive stocks like food and utilities for the shortside.
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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