The markets are continuing to search for a foundation here. The old, stalwart Dow Jones Industrial Index is on the verge of a new, all-time high. Simultaneously, the NASDAQ 100 is continuing to move lower, completing one of those head and shoulders topping patterns we discussed last week. The latter index is heavily influenced by technology and other leading growth stocks. Cyclical names dominate the former.
The NASDAQ 100 topping pattern is even clearer in the XLK Technology ETF. Our core S&P 500 index is caught in the middle – pulled in both directions and ending up virtually unchanged yesterday.
I will publish some more details later today – but this is a tough market to swing trade due to the complicated index math. Day trading has been fabulous. If the patterns are accurate, the NASDAQ is not done finding a low quite yet.
Most corrections end in some correlated capitulation – but that has yet to present. One thing for sure, this has been orderly and healthy. The NASDAQ 100 may even tag its 200-day moving average – and this helps work the froth off this market, which may allow the markets to continue the secular trend once the 20-week cycle bottom is firmly planted. Again, I would rather cover the details later today than rush them out this morning. Beyond these few comments, nothing has really changed in terms of the issues.
Day Trading Today
Truly this volatility has been day trading paradise, making up for the fact that much of the gains happen overnight, leaving us crumbs during the New York session.
We are coming off a very weak close yesterday but now gapping higher by over 30 points. Of course, it is not a true gap, meaning we are not opening above yesterday’s high. However, the S&P futures were up as much as 50 at the Globex high. We are slated to open well within range on overnight inventory that is 100% net long, give or take a few ticks. Current prices are tracking in the middle to the upper third of the overnight range. All of this speaks to trading later rather than earlier.
The value was overlapping yesterday. This is a small bullish carry forward in the sense that it supports the Friday reversal theory. Continue to watch where value develops daily. Remember that price and value are two separate things, the value being more important.
While overnight inventory is skewed heavily net long, we are slated to open within range and value, so gap rules do not apply, and any big moves are likely curtailed a bit. The better trades should develop later in the session rather than earlier. Assume responsive trade within the confines of the overnight range – testing our usual quartet and monitoring for continuation if levels are conquered or not. Of late, there have been good trades on both sides of the equation, both long and short, throughout the day.