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The SPX traded in a 3.8 point range (1351.56-1347.75) all day until 3 PM when it picked up a few points to close at 1353.16. In spite of the narrow range, the NYSE volume was high, with 1.73 billion shares, and the internals positive with the volume ratio at 66, and breadth +1155, in spite of the TLT -0.7%. The NYSE has a skew of about 35% to financial instruments, like preferred stocks and different kinds of financial funds. This narrow SPX range put the traders on the sidelines for the day. There were no significant programs, and therefore no real market movement. Energy is the primary daytrading focus because of the excellent two-way volatility, and that did provide traders with some opportunities yesterday. The OIH gapped up early to 126.22 on the 9:40 AM bar, which was the +1.5 VB, created a trap door setup. The next opportunity was the 50% gap pullback to 123.36, which was also the 240 EMA. All strategies are included in my 1st Hour Trading Module, which you should review if you daytrade.
The SPX and $INDU continue to get even more extended with the key moves being the sudden spikes up initiated by programs, not the steady institutional buying pattern across the NYSE floor. Much of that was the third quarter mark-up. Mid-term elections are about five weeks away, and each crisis that is hyped by the media as detrimental to the administration seems to be immediately answered by another spike up in the major indexes to new cycle highs. It sure as hell isn't the fundamentals as much as "They try to spin them." The SPX and $INDU are into the six month extended reversal zone, and you don't make much money jumping onto the bandwagon jumping at these junctures, as you can see both ways on the $INDU chart included below. If "they" can keep this going into the mid-term election, they will most likely break out the SMH from the current triangle and resistance at the 200-233 DEMA.
Have a good trading day.
Kevin Haggerty
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