The Primary Intraday Focus For Today

• May 4, 2004
• Kevin Haggerty

What Monday’s Action Tells You

The major indices and all of the primary sectors
had a reflex day off the short-term oversold condition. The 4 MA of the volume
ratio going into yesterday was 29 and the 5 RSI, 22. The breadth 4 MA was -872.
The SPX closed at 1117.56, +0.9%. It was +11.42 points above the previous
1107.30 close by the 11:15 AM bar, then a retracement of 60% to 1112 by 2:55 PM
and then a last-hour move up to the 1117.56 close. The Dow was also +0.9.% to
10314 while both the Nasdaq, 1939, and QQQ, 35.10, were each +1%.

The market action wasn’t very strong yesterday as
the NYSE volume was 1.57 billion but breadth was only +685 and the volume ratio
of 65 indicates the universe of stocks was narrow. The leadership in the primary
sectors wasn’t what makes the major indices accelerate. The OIH led at +2.3%
with the PPH +1.3%. The rest of the sectors were in-line with the major indices
except the semiconductors, with the SMH -0.4% on a -4.7% downside reversal after
the initial +2.5% move to 36.20 on the 11:05 AM bar (also the 240 EMA). The
decline was to 34.51 by 2:55 PM before a mark-up into the 35.16 close.

Â	Tuesday 4/27	Wednesday 4/28	Thursday 4/29	Friday 4/30	Monday 5/3
IndexÂ
SPX Â
HighÂ	1146.78	1138.11	1128.61	1119.26	1118.72
LowÂ	1135.53	1121.70	1108.07	1107.23	1107.30
CloseÂ	1138.11	1122.41	1113.88	1107.30	1117.56
%Â	+0.2	-1.4	-0.8	-0.6	+0.9
RangeÂ	11.3	16.4	20.5	12.0	11.4
% RangeÂ	23	4	28	0	90
INDUÂ	10478	10343	10272	10226	10314
%Â	+0.3	-1.3	-0.7	-0.5	+0.9
Nasdaq Â	2032	1990	1959	1920	1939
%Â	-0.2	-2.1	-1.5	-2.0	+1.0
QQQÂ	36.87	36.22	35.64	34.77	35.10
%Â	-0.2	-1.8	-1.5	-2.4	+1.0
NYSEÂ
T. VOLÂ	1.52	1.86	1.86	1.63	1.57
U. VOLÂ	767	247	405	468	1.01
D. VOLÂ	728	1.6	1.4	1.14	537
VRÂ	51	13	22	29	65
4 MAÂ	52	35	30	29	32
5 RSIÂ	57	34	27	22	42
ADVÂ	1841	784	869	1354	1997
DECÂ	1461	2524	2444	1909	1312
A-DÂ	+380	-1740	-1575	-555	+685
4 MAÂ	+41	-810	-949	-872	-796
SECTORSÂ
SMHÂ	-1.2.	-1.5	-2.6	-1.7	-0.4
BKXÂ	+0.3	-1.5	-0.3	-.07	+0.8
XBDÂ	+.01	-2.3	-1.4	-1.4	+0.8
RTHÂ	+1.0	-0.9	-1.0	-0.6	+0.6
CYCÂ	-.04	-2.3	-1.9	-0.5	+0.7
PPHÂ	+0.5	-0.5	-0.7	+.03	+1.3
OIHÂ	+3.4	-2.0	-3.4	-0.2	+2.3
BBHÂ	-0.9	-1.9	-1.6	-0.3	+0.4
TLTÂ	+0.4	-0.9	-0.5	+0.4	+0.1
XAUÂ	-1.2	-7.1	+1.0	-0.2	+0.

^next^

For Active Traders

If you were trading the SPX with either the SPY
or futures, there was the 10:00 AM contra move pullback, then a continuation up
to the 112.29 high for the SPY, which was right at the 240 EMA (5-minute chart).
The retracement from there was to 111.56 and then a last-hour move to the 112.15
close. The 240 EMA went out at 112.16 with the next two intraday focal points at
112.62 (20 EMA on the 120-minute chart) and the AB=CD move off of Friday’s
110.90 SPY low at 112.95, which is also the 34 EMA on the 120-minute chart (523
Trend). This gives you some intraday parameters to work against both ways and it
doesn’t matter whether you trade the SPY or futures.

The SMHs, after opening up, made a 5-bar pullback (5-minute chart) holding a
35.45 intraday low, then reversed above 35.64 to a 36.20 high (the 240 EMA)
level. The -4.7% reversal followed, trading down to 34.51 after a previous RST
attempt that failed at Friday’s 35.23 low and then closed at 35.16 on a rally
from 34.51. That leaves Friday’s 35.23 low as the initial alert.

For Today

Still catching up from vacation and watching the
interest rate scramble, all of which is after the fact to those that have been
selling into the TLT rallies. The fact is, the SPX has held up quite well as an
index so far in spite of the frantic rotation in many groups and the weakness in
the Nasdaq and Semiconductors. The SPX has yet to close -6% below its high daily
close of 1157.76 with 1091.33 being the low close so far. The rally to 1145
-1147 last Monday and Tuesday enabled players to sell the May OTM calls, which
is the 4th month of premium selling against the longer-term LEAP call positions
taken in place of index mutual funds/proxies when the SPX initially hit that
1150-1161 zone.

There is now minimal downside risk and plenty of
upside participation room, which is as it should be as the bull market matures.
I have stated my early 2005 time frame, then decline into 2006 as the highest
probability back in January as the strategy to buy LEAP calls and selling OTM
calls along with some synthetic straddles was implemented

I have included the weekly SPX chart today with
the rising 30 and 40-week EMAs for you to keep it in perspective as the SPX
certainly has some more  room for a normal bull market 10% pullback and I
think that remains the highest probability in May. The QQQ and SMH, because of
levels, are the primary intraday focus today. I will catch up with stocks over
the next few days.

Have a good trading day,

Kevin Haggerty