Quick Review

Friday's half day was as expected, with NYSE volume of only 414 million and almost all the sectors finishing positive between +1% - +3%. The ($NDX.X | Quote | Chart | News | PowerRating) closed at 1577, +1.6%, the ($INDU.X | Quote | Chart | News | PowerRating) +1.3% and ($SPX.X | Quote | Chart | News | PowerRating) +1.2%. The majority of stocks closed positive with breadth at +1420 as most of the 414 million volume was on the plus side with a volume ratio at 82. This kind of holiday trading tells us nothing about buying/selling pressure to initiate trades today from the daily charts, so we start today from the intraday charts with our focus on sectors where the Generals are playing: semis, biotechs and brokers.

To get you back into it, a quick review of the recent strong rally of the 9/21 low will help. In the major sectors, the semis or ($SMH.X | Quote | Chart | News | PowerRating)s have led, gaining +64% low to a high of 44.70; the ($XBD.X | Quote | Chart | News | PowerRating) +59%; the ($SWH.X | Quote | Chart | News | PowerRating)s ran +55% and the ($OIH.X | Quote | Chart | News | PowerRating)s +52%. The (QQQ | Quote | Chart | News | PowerRating)s gave us +49% and the technology proxies, the (XLK | Quote | Chart | News | PowerRating)s, which have less volatility, ran +42%. These are often overlooked by traders but it is a good position vehicle if you sense a move from a key alert zone. The BBHs gained 34% and the RLX at +33% and the CEX at +38%. The SPX ran +23.3% and the Dow +30%.

In line with the major indices are the ($BKX.X | Quote | Chart | News | PowerRating) at +23%, the FPP at +24% and the (WMH | Quote | Chart | News | PowerRating) HOLDRs at +26%. The drugs bring up the rear at +15%. The SMHs backed off from the 44.70 high on 11/14 for a decline of -11.1% to a low of 39.75 on 11/21. It posted a two-day reflex rally into the holiday of +5.3% to Friday's high of 41.86, closing at 41.65. The head-and-shoulder neckline resistance is 41.5 to 42, the 144-day EMA is 42.83.

The .618 retracement to the May high which is 44.36 and the 200-day SMA of 44.11 put the brakes on the SMHs and was a high-probability short trade that most of you didn't take because of the price persistence and emotion going into that level. If you can risk only 1%-3% to make a reward-to-risk trade of 5:1 or better, you take it, especially when it's a rally in a bear market to a declining moving average.

That brings us to the ($SPX.X | Quote | Chart | News | PowerRating) with a 30-week EMA of 1152.50 which has given us six intraday short setups as it fights to get through this resistance which is really 1152-1160, with the high side being the head-and-shoulder neckline resistance. There is a strong confluence in addition to the 30-week and head-and-shoulders resistance: 1155.27 is the 144-day EMA; 1157 is a square-of-nine corner number and 1156 is a natural square number which is 34 x 34.

Next, you have the .618 retracement to the May high of 1174 which is also a square-of nine cardinal number and then the 200-day EMA at 1183 for confluence of three at that zone. Above that is the 233-day EMA at 1197; the .707 retracement at 1207 along with a square-of-nine cardinal number at 1208. The (QQQ | Quote | Chart | News | PowerRating)s closed at 39.28 with big overhead resistance from 42 to 44.50. The 200-day SMA is 42; the .618 retracement to the May high is 42.30; the 200-day EMA at 44.35 and the .707 retracement at 44.48.

Before it gets to that heavy traffic, it must get through its 144-day EMA of 40.60 which it has yet to do. The low end of the uptrend channel for this Qs rally is about 37 and the .318 retracement to the 9/21 low of 27.20 is 35.41. It has been a strong rally and now looks tired with weakening technicals showing up as negative divergence in some of the different indicators. There is no clear position sell entry yet as the short-term trend is still up. I would fade any resistance alert zone if you get an intraday short setup and take the position overnight if it is in the money -- not in a stock, just in the proxies.

The highest probability is a correction from, at worst, the higher end of the alert zone I have mentioned and if they push a bit further. If you are long long-term, tighten all stops and don't chase price into the alert zones.