The Strategies Are Working -- Are You Using Them?

After the three bar early down on the opening, the Dow (INDU | Quote | Chart | News | PowerRating) traded below its 50-day EMA to a 9031 intraday low, then reversed its 50-day EMA, trading up to a 9135 intraday high for a reversal of about 100 points above the 50-day EMA pivot and closed at 9126.44, +0.7% on the day. The SPX ($SPX.X | Quote | Chart | News | PowerRating) also gained +0.7%, closing at 974.12. The Nasdaq (COMPQ | Quote | Chart | News | PowerRating) was again choppy, closing at 1652, less than a point below its previous close. The QQQ was +0.3%.

Total NYSE volume was 1.36 billion, a volume ratio of 62, and breadth +678. Except for the SMH at -0.3%, the rest of the major sectors closed green, led by the OIHs, +4.3%, and the RTH +1.8%. The TLT, which is the long bond proxy, was up again at +0.5%, while the CYC was essentially flat. The common thread in the NDX 100 was the Biotechs, with 40% of the top 25 gainers being biotechs. The Biotech HOLDRs (BBH | Quote | Chart | News | PowerRating) reversed and closed at 126.80, just above its 50-day EMA of 126.15, so that's a focus for today.

For Active Traders

It was another good day for traders using the strategies. The Dow, after giving you a simple reversal above the 50-day EMA, rallied to 9089 then retraced to 9046, just above the 50-day EMA, setting up a 1,2,3 higher bottom with entry above the 10:25 AM signal bar high of 9065.67. This run traded up to a 9135 intraday high, closing at 9126.45. The SPX also gave you a 1,2,3 higher bottom long entry above 966.38, which was also the 10:25 AM signal bar high. The intraday low was 963.82, so this zone has provided traders some good intraday opportunities, not to mention the rally from 962.10 to 1015.41. The E-mini 1,2,3 higher bottom entry was above 965.50. The SMH had a Trap Door setup, with a Kings & Queens entry above the 10:25 AM signal bar high of 31.40, but only ran to 31.72 on the 11:40 AM bar before reversing to a new intraday low of 31.20, closing at 31.38. This was certainly a negative intraday divergence to the SPX and Dow. The QQQ also provided a Trap Door entry above 30.13, which only traded to a 30.50 intraday high, closing at 30.31.

Starting today, the SPY closed at 98, which is right at its 50-day EMA of 97.97, so you have a frame of reference to watch today as an early pivot just as the Dow was yesterday. Price action gets active around the psychological 50- and 200-day moving averages, which always provides either a position or intraday opportunity. The double bottom is just below at 96.43 and 96.34. The QQQ closed at 30.29, just below its 50-day EMA of 30.55, while the Nasdaq closed at 1652 versus its 1658, 50-day EMA. In order to day trade these kind of pivots you must be ready to stop and reverse in either direction because second entry occurs often.

Today's Plan

If anybody shows up in the biotechs today, look for setups in TEVA, IVGN, SEPR and GILD, and if you play the BBHs, they are at a possible pivot point, just as the SPY is. Also look at APOL, PCAR, and SNPS.

The SPX is now 10 weeks into the 1020 - 960 box, with two 1015 highs and two 960ish lows. 1020 is the .618 retracement to the last primary 1174 swing point high prior to the 769 low, so to get churning in a primary Fibonacci zone should not be a total surprise after a +32% move in the SPX to the first 1015 high in eight months time.

From a longer-term position standpoint, the major indices are all trading above their rising longer-term moving averages, so turn off all this daily media hype and key on that, as you are not trying to play these daily trading range fluctuations, which by the way, have been excellent for the synthetic delta neutral straddle put on in this corner for the very reason that the SPX was at a key inflection point zone after a substantial move with implied volatility at the lows.

Have a good trading day,

Kevin Haggerty