Who's On 1st?

Green turned to red yesterday with almost the same statistics. NYSE volume was again about 1.7 billion, a volume ratio flip-flop to just 18, while breadth was -1178 vs. +1221 on Tuesday. All of the major indices declined anywhere from 2.2% to 2.4%. The SPX ($SPX.X | Quote | Chart | News | PowerRating) intraday high was 851.93, which is below the 20-day EMA now at about 858, and also the 50-day EMA at 890. The SPX can't make a higher swing point high unless it trades and closes above 856.12, and of course, it must clear the 20-day EMA and then it runs into the 870 confluence mentioned yesterday. The Generals must show up to make that happen.

The 848 .618 retracement level and the 856 Square of Nine number is the upper boundary for the past nine days for the SPX. Depending on what Thursday brings, an inverse head-and-shoulders pattern is taking form for the SPX if the 800 low holds. Unless I see more than the follow through that we saw yesterday, the 776 magnet is likely to get taken out.

Needless to say, the major indices all had reversal days with closes in the bottom of their ranges. Not what is expected if the Generals were the main force on Tuesday, so you must assume programs and short covering were the real catalysts. I doubt that surprises any of you. 

The SPX put in a two-day head-and-shoulders top which was elected with a break below the neckline at 837. (See your five-minute chart.) The measured objective is 822, which is in confluence with the .618 retracement between 852 and 800 of 820. Any early red Thursday makes this the first awareness zone. 

Most of the major sectors like the BKX, BTK, XBD, RLX and FPP reversed all or most of Tuesday's gains which certainly makes a statement, and not a good one. The semiconductors closed flat, but were green all day until the final thrust down. The (SMH | Quote | Chart | News | PowerRating)s made an intraday high of 21.43, which is right at the 20-day EMA of 21.40, but closed down at 20.31. That's not what I like to see when the volume expanded to 11.5 million shares, the most since Aug. 20. (AMD | Quote | Chart | News | PowerRating) disappointed after the close with a shortfall, and I see that it traded down to 4.20, or -22% on light volume in Island after hours. 

As I am doing this late Wednesday for Thursday morning, I can't see the effect on the other semis in pre-market trading, but I am doing my homework on AMD for a possible longer-term option strategy if my findings are positive, which simply means will the company stay alive.

The SPX is in limbo for me right here. It needs price and volume from the Generals, not programs, to get past some overhead resistance, and I get interested on the downside below 800. 

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