August 29, 2017
By Geoff Bysshe
Today’s gap lower was a big test of the strength of the bull market.
It appears to be obvious that the bulls passed the test by staging a very impressive rally from under many key support levels to closing well above them and even up on the day.
Additionally the related markets that help measure the market sentiment also experience coincident reversals. For example, TLT, GLD and VXX gapped higher but sold off hard.
Days like today are remarkable examples of how powerful the opening range trading tactics are, even if only applied at a very basic level.
For example, if you had long positions that opened below stop levels, waiting for even the 5-minute opening range to also break before exiting would probably have saved your from selling the low. Personally, I prefer to wait for the 30-minute range to be set before getting kicked out of a position.
Today’s big range reversal pattern will likely also exemplify other important trading tactics, and methods for anticipating the market’s next move.
Today’s big range may look bullish on the chart, but it’s not today’s action that will tell you the real health of the bull market.
The big range reversal pattern in today’s markets is a strong indication that the market is not ready to go down, but it doesn’t mean it is ready to go up.
It’s important to see the markets follow through with more and substantial moves over today’s highs. This follow through does not have to happen tomorrow, but until it does I would interpret the market as having only defined a low.
This low, however, is not guaranteed as it should also be tested to be trusted.
Either way, the high and low of the today’s range define whether you should look for the market to move higher or lower.
Furthermore, it’s likely that unless there is a major unexpected bearish news event, today’s low will be the low for several weeks. This becomes even more likely if we see follow through to the upside soon.
S&P 500 (SPY) Key support 244.90, today’s low. Significant resistance at 245.62, 246 and 246.50
Russell 2000 (IWM) Support at 135.75 and then 135.50 and 135. Expect resistance at 137.30, then 137.70, and the big number to clear is 139.
Dow (DIA). Bounced off its 50-DMA, now key support, 216.60. Expect resistance around Friday’s high, 218.85, then big resistance at 220.
Nasdaq (QQQ) Look for support around 140.90. Resistance is at Tuesday’s high, 143.35 and 144.00-.40
KRE (Regional Banks) Support around 51.40. Today’s high, 52, is a pivotal area. 54.00 is major resistance.
SMH (Semiconductors) Bounced of 50-DMA. Still range bound – 84 to 88. 85 is good support.
IYT (Transportation) Looks like last week was a head fake on the breakdown. Bullish day today. Look for support at 165. Must now hold 162.38, and should hold 163.30. Big resistance is at 168.
IBB (Biotechnology) Look for support around 311. Should now hold over 308.50. Resistance area to break is 318. Next area will be 322.50.
XRT (Retail) Held key area of 38.50. Looks good if it breaks 39. Big resistance at 40.
IYR (Real Estate) Inside day at the key level of 81. A break over 81 would look good. Should hold 80.00 area.
XLU (Utilities) Consolidating. Support at 54.40 and 53.60.
GLD (Gold Trust) Wild day but uneventful close. Key level to hold is 123.50 and 123.50. Resistance at today’s high.
GDX (Gold Miners) Look for support at 23.90 and 23.50 Expect resistance at 24.90.
SLV (Silver) Look for support at 16.30-.20 clears key high and the 200 DMA. Resistance at 16.50 then 16.70-80.
USO (US Oil Fund) 9.50 is pivotal. If breaks above, it could create a head fake break down. If it stays under 9.50 it remains bearish.
UNG (Natural Gas) Still in a bear trend according to phases. If it has a 30-min Opening Range breakout over 6.75 it could indicate a multi-week bottom. The all-time low is 5.78, the weekly base high is 9.80. So the risk is just over a $1 and the first target is just over $2, but if it breaks $10 then $12 is the next stop.
KOL (Coal) Consolidating over $15. Look for support at 14.90-.80.
TAN (Solar Energy) 22.00 resistance and 21.00 support. That’s all you should focus on.
TLT (iShares 20+ Year Treasuries) Look for support at 127.30. Should not break 126.70. Resistance at 128.50.
UUP (Dollar Bull) Multi-year breakdown. Look at your weekly charts for any close over a prior week’s high that is over 24.20. Until then, stay away.
FXI (China) Big new high for the move, because long-term charts show 44 as a key area. If it can hold over 43.40, the long-term picture is beginning to look like an accelerating breakout. Support at 43.40 and 42.75. Next resistance is 46 - 46.50
EWW (Mexico) Consolidating between 56-58. If it closes over 57.75 it could run higher for a while. It should hold 56.80 and then 56.
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