Here’s the Deal:
With the setup over the balance of the week,
going into the Payroll numbers it seemed all that was required
for a rally was the release of an employment report. The
numbers came out strong sending the futures rocketing higher
before the open. That part actually began in the middle of the
night in anticipation and the NFP report gassed it.
I prepared a table
ranking all the Foreign market ETFs, in pdf format.
You can view it on the website (Link fixed)
The Dow just barely managed a new high by less
than 10 points. The S&P 500 bettered its high by 5 points.
Considering the Dow is almost 10x the S&P, that doesn’t look
too good. Bottom line, the character of the action at this
point is in keeping with our over-ridding theme that we are in
a final one to three day push higher before a near-term high is
established.
The Dow did not manage a new closing high on
Friday. The short-term cycles allow for another day or two of
positive action, but as we move through the week longer-term
cycles start rolling over. Once this run stalls out and we have
a clear turn lower we will sort out the downside potential.
The Bond market is closed Monday and there is
no economic data. The FOMC minutes are released on Tuesday at 2
PM. That will be a big one as it will give some insight into
the Fed’s thinking. The market is expecting a ¼ point cut at
the end of October, but with healthy economic data going
forward the expectation could change, though I doubt it will.
Folks will try and answer the question by deciphering the FOMC
minutes.
Have a great weekend.
Jim Patterson
Here’re the Details:
The Dow was up 150 at the high of 14,124.54
and it closed at 14,066 up 91, about 58 off the day’s high.
Considering the early closings on Friday it was a solid day,
but there was a notable amount of late day weakness.
Big movers in the Dow: BA was down subtracting
18 while MMM, CAT, AXP, and AA, added about 46.
The top of the Dow’s 21-day 3.5%
exponential trading band was 14,246 at Friday’s close. The
Dow’s theoretical high was 14169 on Friday, well short of the
top of the band. At this point it has become unlikely the Dow
will regain the top of the band. Phrased another way, the Dow’s
rally strength is waning and that usually comes before prices
turn lower. With the cycle configuration there is still time
for the Dow to peak out at 14,200 or so before the weakness
expected next week sets in.
Chart Link
Interest Rates jumped sharply on better
than expected employment numbers: With stronger than
expected numbers bonds sold off. Near-term the TYX is contained
within a wedge like formation. However, it is out believe that
an important low in rates was reached in early September. With
the economy seemingly back on track and the Fed’s recent rate
cut, we are looking for a steepening of the yield curve with
the TYX headed towards the 50 level in the days / weeks ahead.
There is a higher Fibonacci upside target line at 51.70.
The HUI rebounded on Friday: The Dollar
finished about even but Gold (GLD) pushed notably higher and
the HUI followed along. Both gold and the HUI are tracing out
very corrective looking patterns, think high tight flag or
pennant. Once complete both should easily reach new highs. In
the mean time we still can’t rule out another pullback and dip
below Thursday’s lows. Such a move would get the non-believers
excited, but if our interpretation is correct then any such dip
should have difficulty moving much below last week’s lows and
at this time should be viewed as an opportunity to accumulate.
The S&P 500, Sputnik is now in orbit:
Thursday evening I said the SPX was setup like a Russian R-7
Rocket Booster, the rocket that put Sputnik in orbit on October
4, 1957.
The SPX made an aggressive move higher clearing the lower
Fibonacci support zone and coming close to the lower side of
the higher zone, which spans from about 1564 all the way up to
1572. The next higher range is 1590 to 1600. I don’t think we
get that high on this move.
The Very short-term trading cycles call for a high around
Monday afternoon through Tuesday morning and that means the S&P
can and or should push into the 1565 - 1570 zone before rolling
over. A break of 1552 would be a near-term bearish warning
signal. The next very short-term low isn’t due until the second
half of next week.
At this point we expect minor upside follow through on Monday,
but Monday will be quiet with the bond market closed. If this
is the last push higher, as we think it is, then first support
is 1535 then 1505’ish.
The Russell 2000 is signaling a test of 856
lies ahead: We were looking for a good push higher and we
got it. The RUT has established its self well above the 76%
line and at this point we should expect a solid test of 856,
probably higher.
825 is now the main support line to watch. Any pullback that
holds above there is just a little correction. But for now our
sights are focused on higher prices.
The NASD reached a new
high and from a short-term cycle stand point we have one or two
days of positive cycle strength ahead of us. 2725 is now the
support line to watch.
With new highs on Friday, the trend table is
back to buys across the board. It doesn’t get any better than
this.
The Detailed Trend report, CLX Charts, Weekly Trend Signal
Count Charts, have been moved to a new location at this link.
This link now has a Chart of NYSE 8-day Buying and Selling
pressure, plus a few others.
Total breadth was +3072, which is huge. Total
volume was 2.1 billions shares, up from Thursday. That isn’t a
huge day, but it was Friday and the bond market closed early
and that makes the volume level that much more impressive. Call
it new highs on increasing volume. Directionally all the volume
was to the upside with solid buying pressure.
At this point 8-day selling pressure has
fallen to a very low level. The only reason we don’t have
HS-Buy signal on Friday is because the S&P 500 closed up more
than a few points. The point being the conditions are ripe for
prices to continue higher and they are. We have a lack of
selling, but with the S&P already up for two days, looking out
on a 7 trading day basis, the S&P has already advanced for a
couple of days reducing the odds of another 7 days of strength.
At this point the indices have made new highs
but the 5-day RSI readings are at lower levels. This minor
negative divergence is common as indices work into a short-term
high before a tradable pullback.
NYSE 5-day Advancing volume is well below its recent peak as is
buying pressure. These metrics are acting similar to the 5-day
RSIs. Taken together the minor negative divergences suggest we
are nearing a minor high of some sort.
The very short-term cycles point to a minor
high early in the week. From there we are looking for a one to
three day decline that could easily morph into something more
serious. For now we are looking for some upside follow through
on what is expected to be a slow half holiday like Monday.
Jim Patterson
Most Obvious chart resistance levels:
()
Dow
13,490, 13,580, 13,630, 13700, 13,875,
13,932, 14,021 , 14,180,
14,255
SPX
1489, 1496, 1504, 1517, 1525, 1532, 1537, 1548,
1554, 1563, 1573, 1589
NASD
2600, 2622, 2649, 2664, 2685, 2700, 2742, 2795,
2806, 2825, 2844
NDX
1969,
1991, 2000, 2018, 2030, 2061, 2100,
2117, 2132, 2164, 2187, 2200
NYSE
9730, 9860, 9970, 10,000, 10,080, 10,237, 10,272,
10,407, 10,750
RUT-2K
765, 778, 787, 794, 800, 812, 824,
830, 835, 842, 848, 854-856,
866, 876
Most obvious Chart Support levels:
Dow
14,000, 13,925, 13,820, 13,750,
13,620, 13500, 13,356, 13,225, 13,050, 12,985
SPX
1553, 1542,
1535, 1522, 1518, 1507, 1489,
1451, 1428, 1400, 1363
NASD 2717, 2692,
2655, 2621, 2600, 2592, 2577, 2558, 2531, 2516,
2491, 2450, 2400
NDX 2140,
2118, 2102, 2080, 2050, 2000, 1989, 1954, 1923,
1896, 1860, 1810
NYSE 10,118,
10,000, 9920, 9865, 9720, 9600,
9525, 9456, 9385, 9220, 9186,
RUT-2K
845, 824, 816, 805, 800,
795, 787-8, 782, 777, 775, 765, 760, 746, 736
Here’s where we are now:
NASD 100 Index (NDX) Trading System,
trade the QQQQ:
By moving above the 2132 area, the NDX should
take a shot at the 2170-2175 Fibonacci upside target zone. If
you went long before the report or just after the report, hold
on looking for the higher price range. However, the large gap
left at 2110 is expected to be filled over the balance of
October.
S&P 500 (SPX) Trading
The SPX is following our expectations of long
now with an expected turn lower in about one or two more days,
probably Tuesday, FOMC minutes day.
Stick with the long for Monday. If and or when the SPX reaches
the 1570 area you should become quick on the book profits
trigger. Let’s see how Monday’s action plays out. At this time
our expectation is for a reversal from long to short on
Tuesday.
Tactical Stock Trading Powered by the PRS Stock report
WFR rec Long 8/22 @ 58.95, stop 56
closing, closed at 65.59 ** new high for the move
HURN rec Long 9/24 @ 71.08, stop 71.50, closed at 76.71
*New high for move
Long-term Buy and Hold:
AMD rec @ 12.94 closed at 13.63
SMSI rec @ 16.10, closed at 16.35
Jim Patterson
Editor
Tactical Trading Outlook
|
