Let's Try To Break Out Of This Range

If you are trading the S&P or Dow futures in addition to the proxies, then you took the day off yesterday, along with the market. From Tuesday's high of 910.12, the SPX only managed to trade up to an intraday high of 911.22 by the 10:20 a.m. ET bar, then proceeded to trade back down into that 907 - 904 Slim Jim range and stayed there from 10:30 a.m. to 3:30 p.m. before it traded down to an intraday low of 901.74 and closing at 903, -0.8% on the day. The Dow finished at -1.1%, and the Nasdaq -0.6%. NYSE volume still can't break the 1.3 billion level, finishing at 1.25 billion yesterday. The volume ratio was 30, and breadth -695.

Yesterday's SPX range of just 9 1/2 points was the narrowest range since the 954.28 high. The sideways range yesterday set up a head-and-shoulders pattern on the five-minute chart, which measures down to about 896.78 using 904 as the neckline. There are Fib levels from 898 - 895 framed to the last swing point low of last Friday, so you have some awareness levels to be aware of. Also, on the upside, we know where 911 is for any continuation.

In the sectors, the biotechs gained +3.3%, while fool's gold declined, with the XAU -4.5%. Brokers and banks were off small, while the RLX, which is the retail index, declined -2.4% with the negative media Christmas hype on sales. If they keep it up, it will probably push some of them to pretty good buy levels. The SMHs closed down -0.8% after bumping up against the 89-day EMA at 25.75 yesterday. The Micron (MU | Quote | Chart | News | PowerRating) earnings news yesterday might provide us with a new level trading opportunity if there are any puke shots today. The .618 retracement to the 17.32 October low is 22.54. The .50 level of 24.16 has given us two excellent daytrades so far. Be nimble on any third attempt from this level.

The major indices are rangebound for seven days now as evidenced by the Dow's 2.4% range between 8628 and 8423, so nothing exciting can happen until that range is broken either way. The futures are a bit red as I do this commentary, so hopefully there is some early morning weakness to set up some long side trades. Remember, levels and patterns are just lines. They are simply awareness levels where you look for a change in direction from a high-probability zone. There are no absolutes and there is no certainty to any market. You must use common sense, and not just a slide ruler. I detect from some of the e-mails that some of you are looking for that Holy Grail absolute rule. Common sense has to be used in conjunction with high-probability zones.

Stocks Today

On the trading list side today, on the short side I still prefer the index proxies and maybe some of the HOLDRs.

On the long side, some patterns that set up on the chart if we turn and go green are (GENZ | Quote | Chart | News | PowerRating), (ICOS | Quote | Chart | News | PowerRating), (SCIO | Quote | Chart | News | PowerRating), which we got good entry in yesterday, (TEVA | Quote | Chart | News | PowerRating), the (BHH | Quote | Chart | News | PowerRating)s, of course, if they come out of that trading range, and also (BGEN | Quote | Chart | News | PowerRating).

Other stocks are (CAT | Quote | Chart | News | PowerRating) above 46.30, (FDC | Quote | Chart | News | PowerRating), (CYMI | Quote | Chart | News | PowerRating), (EBAY | Quote | Chart | News | PowerRating), (SNDK | Quote | Chart | News | PowerRating), (HOTT | Quote | Chart | News | PowerRating), and also in the oil services if they turn around and come back for them today, I like the (OIH | Quote | Chart | News | PowerRating)s on any reverse.

Have a good trading day.

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

Five-minute chart of Tuesday's NYSE TICKS