Following the Leader

If the pattern progresses and succeeds, that tells us we are on the right track. If it fails, that also tells us something. In the latter case, failure could foretell a rare, left translation peak in the last nominal 20-week cycle of four in the nominal 18-month sequence. So I am keeping an open mind to all possibilities, but the probable outcome is moving to the neckline and eventually break higher.

In the meantime, energy stocks are moving down to their trendline, so I keep an eye on that. Interest rates are in a short-term down cycle – and that is helping lift the NASDAQ 100 for now.

Other than the issues above, I am looking to get the 5 or 8-day exponential moving averages under us to use as a rising stop. I will publish levels later this morning.

Day Trading Plan

A new day confirms the slow rotation back into tech, with returns in the Nasdaq 100 doubling the S&P 500 overnight and making me look smart. Naturally, I relish these days and bank them for the days I don’t look so smart. Breadth’s weakness tells me that the rotation isn’t solid yet, and the whole thing still seems to carry an air of falling apart at any moment, but the rotation is happening.

The gap higher this morning is in the middle of yesterday’s range for both the NASDAQ 100 and S&P 500 futures, and hence gap rules are not in play. Overnight inventory is balanced to slightly net short. Current prices are ticking in the upper third of the overnight ranges. This indicates some strength going into the morning session.

For all the late-day selling yesterday, note that value (where 70% of volume occurred) was unchanged. This keeps the status quo intact more than any other data point. The Globex highs in the NASDAQ 100 and S&P 500 futures at 13150 and 3919, respectively, should be seen as  potential breakout levels. There is nothing else pointing to the open’s potential direction, so let the market sort itself out for 30 to 60 minutes and follow the usual quartet pattern.