While we're not seeing an overly bullish move in the major indexes today, stocks are holding yesterday's gains and adding to them with the Dow Industrials (INDU) 7,951 +0.39% showing a 30- point gain, the broader S&P 500 (SPX.X) 839 +0.39% gaining 3 points, the narrower S&P 100 (OEX.X) 423 +0.43% gaining 1.8 points, while the tech-heavy NASDAQ-100 Index (NDX.X) 985 +1.59% gains 15-points.
In this morning's market monitor I've been updating traders on the major indexes and where they've been trading as it relates to the pivot analysis matrix, and while the Dow, SPX, OEX and BIX.X have been hovering around their DAILY R1 levels of resistance and WEEKLY Pivot levels, the NASDAQ-100 Index (NDX.X) and Tracking Stock (AMEX:QQQ) $24.50 +1.95% have been able to trade their DAILY R2 levels of resistance and achieve the their WEEKLY R1 levels of resistance. In fact, the high trade of the morning in the QQQ, which was seen at 11:00 AM EST, was $24.61, which is today's R2 level.
In the market monitor, I profiled a bearish traded in the QQQ as it appeared to find a rejection, or selling, just above its DAILY S1 and as discussed in last night's Index Trader Wrap, was a level or zone of resistance from $24.39-$24.49 that a bearish trader would look for selling resistance.
I've monitored the QQQ and since that trade profile and have suggested that traders place stops just above the $24.65 level currently. The observation that the NDX and QQQ have been able to achieve their DAILY R2 levels is a sign of some renewed strength, or at least lack of selling in the NDX/QQQ right now.
Here's a quick look at the Pivot Analysis Matrix. In green, I've highlighted those levels that have not been traded. As such, a trader observes these levels as potential levels of support right now and can assess them as reward targets for bearish trading, or support levels where a stop might be placed just underneath if a trader is inclined to take a shot at a bullish trade.
Blue levels are those levels that have seen a trade TODAY. Red levels are those levels that have NOT been traded today, and deemed resistance.
Pivot Analysis Matrix
Some traders have set up their own pivot matrix using the formulas previously provided. I don't think a trader has to update the levels on an hourly basis, but the DAILY could well be deemed "short" term, WEEKLY more "intermediate-term" and MONTHLY "longer-term." Each level of support or resistance that has NOT been traded becomes a level of risk/reward depending on the posture of the trader.
For example, in my profiled QQQ trade, I see that WEEKLY R2 is a bearish trader's "next level of risk." I can reduce the risk to a trade at $25.32, with a daily stop loss order at $24.65.
I'm also monitoring the S&P Banking Index (BIX.X) 271.68 -0.39%, which is just now (as I write) turning marginally red. Per previous comments in my Index Trader Wrap, this is something I think a BEARISH trader in the major indexes needs to see. Today's trade in the BIX.X has been very "range-bound" as depicted by the above matrix, where we only see the one level in the DAILY and WEEKLY pivots traded.
Therefore, it was/is my thinking that the QQQ offered a good "risk/reward" trade as outlined, but I would want to see continued weakness in the banks.
I'm also watching the U.S. Dollar Index (dx00y) 100.57 +0.29%, and here I see some strength in the Dollar, that as a bearish trader, I really DON'T like. I think a bearish trader wants to see weakness. Technically, I'm looking at the 50-day SMA at 101.94, which is trending lower to keep the dollar in check, but there's still some upside in the dollar should the recent three- day rebound continue.
Treasuries are a mixed bag here. Earlier this morning I made note that the shorter-dated 5-year Treasury was seeing some marginal buying and that buying has picked up a bit with the 5- year futures (fv03h) 113'235 +0.10% up marginally from earlier market monitor notes. This is something I think a BEARISH equity trader does like to see. This is a short-term sign that the MARKET is still a bit "defensive" and willing to seek out some safety and get a lower YIELD return, but perhaps looking to not take on the risk of equities. The modest buying in the 5-year note has spilled over to the 10-year futures (ty03h) 114'100 +0.11% and this too is favorable I feel for my QQQ bearish trade setup.
As the day progresses, I would be looking for some bank softening to then "spill over" to the SPX and OEX and eventually have the NDX/QQQ giving back gains at a "higher rate of speed."