In Play Today...

The SPX ($SPX.X | Quote | Chart | News | PowerRating) bounced off its 200-day EMA on Monday, closing at 1087.12 and had some continuation yesterday, +0.8% to 1095.49. The Dow ($INDU | Quote | Chart | News | PowerRating) was just +0.3% to 10,019, as the defensive stocks and drugs were red.

Technology has been the leader since 05/03 from an oversold condition, and of course, led by the semiconductors, with the (SMH | Quote | Chart | News | PowerRating) +9.8% from a key zone and 34.50 05/03 low with the five-day RSI at a very short-term oversold condition of 12. There was an extension of the last leg up at 34.73 and the .382 retracement to the October 2002 low of 17.32 at 34.90. Seventy percent of the SMH position was sold into yesterday's rally with the 37.88 high and 200-day EMA at 38.16 and the five-day RSI now 76 after six straight up days. Trailing stops on the balance are at -1.5% from each rally high.

The Nasdaq ($COMPQ | Quote | Chart | News | PowerRating) closed at 1931, +1.9%, and re-crossed its 200-day EMA of 1915, while the (QQQ | Quote | Chart | News | PowerRating)s were +1.5% at 35.19 (100% of position still on). NYSE volume was 1.53 billion, volume ratio 79 and breadth +2021 (certainly helped by the TLTs +0.5%).

Yesterday's SPX move came off the 4 MA of the volume ratio at 26 and is still 31 after yesterday. I follow the Fidelity Select funds very closely as (although I am biased) they are simply excellent stock pickers and probably have the most talented group of in-house research staff in the business. Since 05/03, the four funds that have a positive return are the FSELX (Fidelity Select Electronics) and also the Network, Computer and Technology Select funds.

If you look at a chart of FSELX (below), which has led all of the Select funds since 05/03, and compare it to the SMH chart, the obvious deduction is it's overweighted in semiconductors. And (INTC | Quote | Chart | News | PowerRating) at +4.5% yesterday certainly helps both. FSELX closed at 39.82 yesterday, +2.4%, with its 200-day EMA at 39.95, which is also the down trendlines from the April 44.94 high at 40.50. Looking at the SMH chart, you see that the April trendline was crossed above 36.75 and the 200-day EMA is 38.16 vs. the 37.80 close and +2.7% day.

For Active Traders

(IWM | Quote | Chart | News | PowerRating) -- the Russell 2000 --  was a focus into yesterday with the 108 zone a key level and RST setup above 108.76. Intraday entry was on a re-cross of the 108.11 200-day EMA on the 9:35 a.m. ET bar and kept as an RST position because it closed at 109.25 above the 108.76 high of the low day, which also had a five-day RSI at 11.46. The IWM hit a 109.60 intraday high, so certainly daytraders that played the 200-day EMA re-cross did well. Trailing stops are now above breakeven.

Yesterday's gap opening didn't give traders much to work with in the major indices.

Today's Action

The question of where is the SPX going to me is a "I don't know or care" now because the index/HOLDR positions were entered correctly at oversold levels and are now green with trailing stops above breakeven. Should there be a move back to the 1140 - 1150 level (don't think so right here), the June out-of-the-money premiums will be sold again. The next key time zone is around June 15, and that will probably present another good position opportunity.

The initial focus today is 108.11 IWM, 1915 Nasdaq, 108.41 SPY, which closed at 109.75 in an RST position after the bounce off the 108.36 rising 200-day EMA on Monday (so you had a carryover long into yesterday's gap opening). For the DIA, which closed at 100.24, it is 100.20. These are all 200-day EMAs, so it gives daytraders flexibility both long and short. The XAU has retraced to the .618 retracement zone of its 07/26/02 low of 54.67. It bounced off that level on Monday and had some continuation yesterday, closing at 81.48, +1.9%. Certainly a rally to its now declining 200-day EMA of 93.65 is a possibility.

(NEM | Quote | Chart | News | PowerRating) is a major precious metal holding for the Generals and has retraced 50% to its 20.80 07/24/02 low, down from the rally high and double top of 50.28 and 50.20. It closed at 36.70 with the 200-day EMA at 40.85, so it is in play again and goes on the focus list along with any similar gold setups for a reflex from this area.

Have a good trading day,

Kevin Haggerty