Just The Facts
Just The Facts  The Dow closed at an all-time high of 9736.08 on Friday, up
268.68 on the day. Six stocks–IBM, AXP, MCD, WMT, UTX, and T–accounted for 46 percent of the
move.
Key point 1: Continue to look for trades in the key institutional stocks because in a
price-weighted average, the higher-priced stocks will take the averages wherever the
institutions want them to go. This is where you’ll find the highest-probability short-term
trades.
The S&P 500 closed at 1275.44, just below its all-time high close of 1279.63. Look for a new
high close as well as a break above 1284, the high-end of an eight-week trading range in the
S&P.
Key point 2: Concentrate your trades in cup-and-handle and consolidation patterns that
are within striking distance of new highs. The strong stocks will get stronger. It has to be
that way so the institutions can keep us in the game and out of money markets (where the fees
are minimal).
If this move to new highs is real, the tech stocks consolidating in five-to-six
week base patterns above their 50-day moving averages will be good short-term (both intraday and
two-to-five day) trades. The institutions will take some of the techs up again; they have to,
if the S&P is going to break out strongly from its trading range.
The trading sequence was very strange last week. Watch closely and see how it plays out.
Last Wednesday, the S&P futures were up
early, moved sideways until the late-afternoon low, at which point the Mysterious Futures Buyer
took the futures to their highs in the last half-hour to close right at their 50-day MA, generating a
sigh of relief in the market.
Thursday saw the S&P futures strong early, with stocks gapping open, and, of course, Bob Rubin
telling us, “The U.S. economy is likely to remain solid and sound.” But alas, too much gap action
on the open resulted in a sideways market for most of the day before a move to a new intraday low
around 2:45 p.m. Worried? Not me. In comes our futures buyer, driving the market to a new intraday
high on the close. This set the stage for Friday’s clean-up hitter.
Friday was huge, with the futures rocketing on some whisper-improved employment and wage numbers.
So why did the long bond close below its midpoint with all the “great news”
(and from an oversold
condition to boot)? Specialists had a field day on gap openings (most of the openings were the
high of the day). It was too much, too soon, and the market traded sideways to down until–
you guessed it–our futures buyer arrived to take the market to highs once again.
Greenspan and many of his regional cronies will be in the news this week (again), and we also
have an auction this week, don’t we Mr. Rubin?
Target Stocks Of The Day  Excellent patterns near highs and in the direct
path of institutional buyers include Qwest Communications [QWST>QWST],
Medimmune [MEDI>MEDI], America Online [AOL>AOL],
Amgen [AMGN>AMGN], and Federal Express [FDX>FDX].
Consolidations near 50-day moving averages: Freddie Mac [FRE>FRE], Ascend Communications
[ASND>ASND] Tellabs [TLAB>TLAB] and Bristol Meyers [BMY>BMY].
Remember, patterns of institutional favorites near highs are a must for your trading list.
See PFE, UTX, QCOM, COST, YUM, and PVN from last week, and CMB and SCH from prior weeks. Save
all those daily charts for reference.
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click
on the link below to go to his new series of tutorial articles.