SP500 1,159.73 -3.94 -0.34%
COMPQ 2,374.67 +0.64 +0.03%
Russell 2000 695.48 +5.87 +0.85%
Exchange NYSE NASD
Advancing 1,718 1,619
Declining 1,363 1,075
Oil $76.37 -0.43
Gold $1,219.90 +19.50
SOX 367.48 -2.75
VIX 28.84 -0.60
Index Direction Confirmation
VIX Down Yes – SPX
SOX Down No – COMPQ
Strongest Sectors: XLU +0.20%…XLY -0.03%...XLP -0.04%
Weakest Sectors: XLB -1.26%...XLE -0.66%...XLK -0.66%
Eight of nine sectors moved lower on Tuesday. Utilities, Consumer Discretionary, Consumer Staples, Healthcare and Industrials were stronger than the SPX -0.34%.
Sector Watch
Up Trending: XLY, XLI, XLP, XLF
Horizontal Breakout:
Sideways: XLK, XLE, XLB, XLV, XLU
Down Trending:
Key Resistance Levels
1,155 = 1,119 BO chart target – Dec 23
1,178 = Fib extension
1,200 = Jul 2008 support
Key Support Levels
1,145 = 1,133 BO chart target – Dec 31 Low
1,125 - 1,133 = 1,075 BO chart target - Sep 08 Low
1,105 - 1,113 = November High
After the 49 point SPX rally on Monday, a pause that allows short term profit takers to sell is typical. The questions on this type of pause are:
How big (collectively) are the sellers?
Are there still buyers that are willing to pay a significantly higher price than the were just two days before?
There are some technical techniques that allow us to evaluate these questions. One is the Fibonacci technique that I shared in Monday's post.
A second technique is using the mid section of a large white candle as short term support, for example on Monday's large white SPX candle. The technique doesn't work on a smaller candle like the SPY on Monday. The SPY reflected the full gap on the open and therefore did not draw a large white candle.
If selling is heavy then the 50% Fibonacci level is often broken as is the mid section of a large white candle. However, if buying is stronger, even when selling is heavy, price will stay above the 50% Fibonacci retracement and the mid section of the large candle. When this occurs as it did on Tuesday, it is what I refer to as the “Pause that Refreshes.”
When a support bounce is followed by a “Pause that Refreshes” and the bounce resumes after the pause it will provide even more entry opportunities.
Only three of the eighteen stocks in our watch list which broke out of their 30 DMA on Monday fell below their 30 DMA on Tuesday. See full list below. This is a good indication of short term strength and that we should look for support bounce continuation.
Look at these Charts
(click image to enlarge)
Traders still need to focus on trend and buy where they are supposed to buy and sell where they are supposed to sell according to their rules. Many new traders may be tempted to ignore their rules after pull backs, practice doing the right thing...
Dave's Insight: Follow Your Rules...still the right action to take.
Guidance:
The SPX rose to 1,170 before pulling back and closing at the 1,155 resistance level. On Wednesday watch to see if the SPX stays above the 1,140 support level which is both the mid section of Monday's large white candle and the 50% Fibonacci level from Friday's close to Tuesday's high.
Trade strong stocks up. Look for entry signals into support bounce continuation on Wednesday.
Trade weak stocks down.
The VIX fell a modest -0.52 and is still above last Wednesday's 25 level.
The short term trend is neutral.
The six-month trend is neutral.
The twelve-month trend is up.
Continue to focus on and trade setups on the charts of the stocks you watch, trade with the trend and follow your rules.
Adjust your stops according to your rules for up and down trending trades.
AAPL +2.53
QCOM +0.11
GOOG -12.60
BIDU +19.39
NDX 100 stocks stronger than the NDX include: HANS, ERTS, JBHT, BIDU, SHLD, GILD, WYNN, FWLT, MICC, CA, VRTX, WCRX, FAST, RIMM, MXIM, AMAT, IACI, CEPH, AAPL, DTV, COST, INTU, DELL, ILMN, AMGN, URBN, XRAY, SYMC, YHOO, BIIB, ROST, LBTYA, AKAM, CELG, LIFE, EXPD, BBBY, GENZ, QCOM CMCSA, VRSN and EBAY.
Weaker than NDX: PCLN, STLD, GRMN, LINTA, GOOG, ADSK, FSLR, RYAAY, EXPE, APOL, MRVL, INFY, ADBE, BRCM,NTAP, SIAL SBUX, NWSA, INTC, ESRX, NVDA and ALTR.
Stocks to Watch on Wednesday
Holding Above 30 DMA
NFLX, WHR, AIV, OSTK, ICE, EXBD, FAZ, NTRI, BYI, CRM, DHR, GR, HAS, HLF, MCD, PNC, SNDK, SPG, STI, SWK, URE, UNG, WFC, WFMI, ZION
Moving Above 30 DMA = 0
Moving Below 30 DMA = 3
ATI, CAT, CHL
Staying Below 30 DMA
GME, SYNA, HANS, LXK, WMT, ACN, BA, LVS, MYGN, AMX, BKC, DE, DECK, DOW, FAS, FLS, JEC, PCLN, PCP, TSL, UAUA, UNP, USD, USO, UYG, ATW, AMD, BAC, CREE, GES, MA, V, CAM, SWN, BUCY, WLT, CLF, MHS, WCG, ESI, GMCR, GS, FCX, X, PWRD, AGU, IPI, POT, MOS
Intermediate Term Market Trend: Neutral
Short Term Market Trend: Neutral
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