If You Missed Yesterday’s Moonshot, Here’s What Happened — And What To Look For In The Future

July 2, 2003
Kevin Haggerty

What Tuesday’s Market Action Tells You

Yesterday’s
market action was a trading moonshot for those of you that are using the
strategies from the seminar and/or modules. Markets are perverse and yesterday
was no exception. There was an early overreaction to inane news and then a
reversal off of a key inflection level that resulted in a major intraday trading
opportunity that was good for almost 20 trend up points in the futures. The bias
going into the July 4 weekend was up, as institutions generally invest some new
monies if they are getting some in, so you were not surprised at any rally
attempt, but the magnitude of yesterday’s reversal sent daytraders home very
happy.

For Active Traders

The gap down opening started the day off with a
clearly defined Flip Top pattern with the required filter. Entry on the short
side was below 97.15 on the 10:00 a.m. bar. Things usually happen around that
10:00 – 10:15 a.m. time slot. The
(
SPY |
Quote |
Chart |
News |
PowerRating) traded down to the 96.43 intraday
low on just one five-minute bar at 10:05 a.m. That was a 962.10 intraday low for
the SPX. There is a confluence of numbers from 960 – 963 and that was our first
anticipated awareness level after breaking the head-and-shoulder pattern. (See
the June 30 commentary.)

Yesterday’s volatility bands for the SPX were
1.0, 965.62; 1.28, 963.14; 1.50, 961.19; and 2.0, 956.75. Between the volatility
bands and that 960 zone of confluence, you were alert for any trade setups in
this zone. You were not disappointed, and there was an RST long entry above
964.30, which also became a 1,2,3 higher bottom entry above 964.26 for those of
you who are not familiar with RSTs. Once price also re-crossed the 1.0
volatility band at 965.62, you had to be on that train because it was an entry
at the lowest common denominator with excellent risk/reward. From entry, the SPX
ran up to an intraday high of 983.26, closing at 982.47. Whether you traded the
SPYs or futures, it was a nice moonshot.

The QQQ gave you the same reversal patterns as
the SPY, while the SMHs presented you with a 1,2,3 lower bottom with entry on a
reversal of the 27.72 low, and then a 1,2,3 higher bottom entry above 27.79. The
intraday low was 27.65, right at its 1.0 volatility band for yesterday. The SMH
ran up to a 28.97 intraday high.

Needless to say, when an index or HOLDR gives you
a reversal pattern setup, that means some of the stocks that comprise the
HOLDR/index are obviously also setting up. For example,
(
KLAC |
Quote |
Chart |
News |
PowerRating) traded down
to a 45.02 intraday low on the 10:55 a.m. bar, which was right at the 1.5
volatility band at 44.98. From that low, a 1,2,3 higher bottom set up with entry
above 45.20, which ran to a 47.03 high, closing at 46.93.

If you trade big cap stocks — and you should —
and you don’t have the volatility bands for the SPX 500 and NDX 100 in front of
you every day, then that’s all the better for us that do. The Flip Top strategy
with filter is explained in the First-Hour Strategies module, along with Opening
Reversals, Trap Doors, and Gap Pullbacks. The 1,2,3 tops and bottoms have their
own module, and the RSTs are only taught with the seminar materials, which
includes everything in the new seminar, video and 553-page manual.Â

Today’s Plan Of Attack

Both the
QQQ and SMH closed above their 20-day moving averages of 29.96 and 28.71,
respectively, so they become initial downside pivots today and also a potential
upside re-cross if they shake the tree early.

The SPX closed at 982.47, above its 20-day EMA,
which is now 980.75, and just below the “523” longer-term moving
average, now at 982.88

Pre-holiday trading gets thin as professionals
get a leg up on the weekend, and that makes it easy for the hedge funds to push
price, especially if the Generals are trying to put some new money to work in
individual stocks, rather than just buying futures and/or index proxies and
sector HOLDRs to gain equity exposure while buying stocks at a future date when
prices are in line.