September 20, 2011
By Geoff Bysshe
There are two notable points today.
First, make sure you review the divergence in the market watch charts at the OR lows today. The strongest index, the QQQ, did not make a new low on the day at about 10:15 as the SPY and DIA did and the IWM matched the low of the day to the penny. See chart below of QQQ vs. SPY.
When a divergence like this happens and the new low indexes put in an OR Reversal, you should be on alert for a rally. This was not an easy call today because it happened well below S1. As a result the trade was not to buy the indexes but rather look to buy the gapping stocks that are on the Long Focus list that were trading above their key pivot levels like CMG, GMCR, PANL, and AMZN all of which when on to have outstanding rallies today.
Second, tomorrow, Tuesday, will be the first day in 5 that we’ve had negative stack in all 4 indexes. The QQQ continues to be strong and the strongest but it’s right up against the key resistance level of 57 and the other 3 are struggling to keep up. With the Fed meeting over the next couple days, and the daily condition of all but the Q’s being range bound. It’s best to follow the pivot and O.R. set up rules closely if you’re trading the indexes. And you may want to pay a little more attention to the short side of the Focus List.
Let the market tell you what it wants to do. Don’t assume anything.