Friday started with a gap down and stayed in a range once again. It was the same as Thursday's action. The move we expected to see on the DIA and the SPY's 60 min charts was gone with the morning gap down. We can see that all three indices stayed in range. The market looked weak all day but intraday long trades did much better than short trades. I kept expecting Wednesday's continuation to start, but that never happened. The DIA found support at it’s' 200sma 60 min.
The SPY is at its' daily 20sma support area, while the QQQQ found support area at its' daily 10/200sma support area. For the SPY and the DIA we saw a leg down on the daily charts. I still think that we could see a weekly reversal, but that can happen with more daily jumpy action and in that case we could see a head and shoulder pattern, but for now that is just guessing. The Indices haven’t formed any low risk patterns on the daily charts and we can expect that this type of action with gaps and range action could continue next week too.
After the market opens we can start with fast trades (scalps) which work best in this kind of market action. Since continuations aren't working well lately, my focus will be on swings with larger stops and scalp trades. Scalps are not my favorite type of trading but for now that is what market giving us.
In my opinion, volume is the main market problem. Without volume we can’t see “healthy” moves in any direction which can result in the same kind of jumpy action we have been seeing without strong direction and pace. On the weekly charts we can see that the indices made a red bar and the DIA was the weakest and broke down, under its' previous weekly low. The QQQQ was the strongest and closed above its' 20sma support area. The DIA and the SPY reached their support areas (previous resistance is now support). Last week's volume was light and it was just the first correction week after the indices reached resistance last week.
For the longer term, I’m staying with the same opinion that I have repeated several times in last week's commentaries. We have seen only the start of a correction from the weekly/daily trend up. I didn’t like the daily uptrend on decreased volume and I didn’t trust it much. But also I don’t like last week light volume on the correction start. The DIA broke under its' previous bar’s low (weekly chart) but on very light volume. The SPY and the QQQQ's volume was slightly higher. We can see many support areas in case the indices go down but we can also see resistance overhead. I know this all sound messy, but I am just trying to explain why we can continue to see the kind of choppy action we had over the last few weeks. My focus will stay the same until the market action changes.
If anyone has any questions or comments, please feel free to contact me.
Good luck with your trading.
Ivica Juracic
