Stock Indexes retreat

sp0905.pngStock indexes were lower today in a choppy, light volume session. Late in the session the daily lows were re-tested, found some support, and rallied a bit off the lows. The S&P on the close held above the three day pivot (yellow dots), however it did close under that swing point I drew yesterday, and under the standard error channel, which is rolling over. The momentum inidicator in the subgraph is rolling over with divergence, but is still holding above its signal line. The failure to hold the breakout of that swing point of 8 sessions ago, where the blue line is drawn, is not a good sign, although this type of breakout failure would have more meaning if it had occured at a high point such as the end of a trend, or at least a 20 or 30 day high, rather than a bounce after a sell-off. A re-test of the lows is still a possibility. I’ll await a downturn in the indicator under its signal line and for prices to stay under the three day pivot. I’m uncomfortable with the scenario of a re-test, as that is what most people are expecting. If the Fed fails to act at the next meeting, the re-test might turn into another leg down. It seems unlikely that they won’t act.
q0905.pngThe Nasdaq 100/QQQQ held up much better than the other indexes early in the day, and was only down about half as much, but later in the session gave way and actually gave up a bit more ground. The three day pivot (yellow dot) held, as did the mid-point of the regression channel. Like the other indexes, the momentum indicator flipped down but didn’t cross under the signal line, and in this case the is no divergence. I’m still trading the Nasdaq from the long side, and will trade the SPY from the short side if the momentum indicator turns under the signal line. As has been the case the last few weeks, the daily charts have been the roughest to trade. The weekly and 60-minute charts have more clarity, in my opinion.

Gold was little changed, but was encouraging that the rally yesterday held.

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