The Game Is On

It looks like they found the beach ball again. Yesterday, the indices rebounded, with the SPX ($SPX.X | Quote | Chart | News | PowerRating) +1.8%, Dow ($INDU | Quote | Chart | News | PowerRating) +1.4%, Nasdaq ($COMPQ | Quote | Chart | News | PowerRating) +2.3%, and NDX ($NDX.X | Quote | Chart | News | PowerRating) +3.4%. NYSE volume was about average at 1.35 billion, the volume ratio reversed to 76 from the oversold 8 on Tuesday, and breadth was +1260. At 7:00 a.m. ET this morning, I see the S&P futures -10, Dow futures -75 and the Nasdaq futures -13. What a great game it is.

This kind of volatility gave us excellent opportunity yesterday in the major indices, semis and biotechs. After the gap up opening, the indices reversed and made intraday lows in the afternoon which set up some excellent trades. The homerun was the SPX, which gained over 20 points from the 875 longer-term standard deviation band given to you in yesterday's text.

It was a sequence trader's delight as you had a key level with an RST entry in confluence with a 1.27 Fib extension of the leg down into the close on Tuesday. That late Tuesday low was also the 3 point on the RST. If you have attended a seminar or gotten the tapes and didn't get it, then you must get more disciplined anticipating potential setups as they develop.

Entry was above the high of the low bar, which was 877.27, as the SPX ran to an 896.10 high, closing right on the .382 retracement level of 893, which is using the 965 high and the 776 low. This entry also became a 1,2,3 higher bottom, with entry above 878.12 and took off right at one of the program time zones I've given to you on TradersWire.

My focus yesterday was on the semis and biotechs and proved to be rewarding. (KLAC | Quote | Chart | News | PowerRating) made a run from an inverted head-and-shoulders pattern and the right side of that pattern is, and is usually always, a 1,2,3 higher bottom which gave you an earlier entry. The (SMH | Quote | Chart | News | PowerRating)s had come earlier from a 1,2,3 higher bottom running almost a point. (QLGC | Quote | Chart | News | PowerRating) had an excellent run from a 1,2,3, along with 1,2,3s in (NVLS | Quote | Chart | News | PowerRating) and (MXIM | Quote | Chart | News | PowerRating). The (QQQ | Quote | Chart | News | PowerRating)s and Nasdaq both came out of RSTs. The (BBH | Quote | Chart | News | PowerRating)s formed a double bottom at the 78 level, then came out of a symmetrical triangle above 79.25, running to 81.65. There are obviously other trades in many of the other biotechs.

Hopefully, most of you caught the afternoon trend from the key level, as there was opportunity across the board, not just in semis and biotechs, but my focus remains there because of the volatility. Watch the bouncing ball and you will usually find setups around these key levels. 

Have a good trading day.

Five-minute chart of Wednesday's SPX with 8-, 20-, 60- and 260-period EMAs

Five-minute chart of Wednesday's NYSE TICKS