Do This For The Major Indices/HOLDRs You Trade

  • May 26, 2004
  • Kevin Haggerty


Listen to Kevin Haggerty on a live
conference call today after the close.
Click Here.

What Tuesday’s Action Tells
You

The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) closed above its
11-day
range at 1113.08, +1.6% on the day and right at its 50 EMA of 1113.32. The
Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was also +1.6% at 10,118, while the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was
1965, +2.2%, and the
(
QQQ |
Quote |
Chart |
News |
PowerRating) 35.96, +2.0%. It was a trend up day with
price
trading above the 20 EMA (five-minute chart) after our first-hour Trap Door
strategy entry. The extent of the move was luck, but getting in with the
correct
strategy at the correct time is preparation and anticipation.

NYSE volume expanded to 1.55 billion, which
is
positive, with the volume ratio at 89 and the 4 MA now 67. Breadth was a big
+2230 with the 4 MA at +1339 and the 5 RSI at 78. The
(
TLT |
Quote |
Chart |
News |
PowerRating)s were +0.3%
and
that helped the breadth. The SPX, after hitting the confluence zone and
bouncing
off the 200-day EMA three times, is +3.4% off the 1076.32 low on 05/12/04,
which
was the last short-term oversold condition with the 4 MA of the volume ratio
being 26, and 31 at the bottom. We have now entered the high zone.

 

  Wednesday
5/19		 Thursday
5/20		 Friday
5/21		 Monday
5/24		 Tuesday
5/25

Index 

SPX  

High 		 1105.93 1092.62 1099.70 1101.71 1113.80

Low 		 1088.49 1085.43 1089.19 1091.77 1090.74

Close 		 1088.67 1089.18 1093.59 1095.34 1113.08

% 		 -0.3 +.05 +0.4 +0.2 +1.6

Range 		 17.4 7.2 10.5 9.9 23.1

% Range 		 1 52 42 36 97

INDU 		 9938 9938 9967 9958 10118

% 		 -0.3 0 +0.3 -.08 +1.6

Nasdaq  		 1898 1897 1912 1923 1965

% 		 +.02 -.08 +0.8 +0.6 +2.2

QQQ 		 34.69 34.85 35.02 35.26 35.96

% 		 -0.1 +0.5 +0.5 +0.7 +2.0

NYSE 

T. VOL 		 1.54 1.21 1.26 1.23 1.55

U. VOL 		 793 529 840 823 1.34

D. VOL 		 729 669 402 376 163

VR 		 52 44 68 69 89

4 MA 		 47 47 60 58 67

5 RSI 		 36 37 49 53 78

ADV 		 1791 1938 2187 2395 2800

DEC 		 1524 1388 1086 920 570

A-D 		 +267 +550 +1101 +1475 +2230

4 MA 		 +235 +264 +850 +848 +1339

SECTORS 

SMH 		 +0.4 -0.5 +0.4 +0.6 +2.7

BKX 		 +.03 +0.5 +0.8 +0.3 +1.5

XBD 		 +0.7 -0.1 -0.1 +0.6 +1.6

RTH 		 -0.5 -.06 +0.5 +0.5 +2.1

CYC 		 +.09 -0.6 +0.7 +0.9 +2.0

PPH 		 -0.8 -0.3 -0.2 -1.0 +0.9

OIH 		 -0.2 -0.5 -0.7 +4.2 +1.4

BBH 		 -1.3 -0.4 +0.5 -0.3 +1.6

TLT 		 -0.3 +0.8 -0.4 +0.3 +0.3

XAU 		 +1.8 -0.6 +2.2 +1.4 +1.6

^next^

For Active
Traders

It was a down opening into the 10:00 a.m. ET
timeframe which set up the Trap Door long entry, which was also an RST setup
after the SPX took out Monday’s 1092.51 low. After the entry, it re-crossed
its
20, 60 and 240 EMAs and it was trend up above its 20 EMA for the rest of the
session. If you missed that initial entry, there were a couple of Slim Jims
above 1101 and above 1108. Those of you that have my material should have
had a
good day. If not, you have a trigger problem. The QQQ also had the Trap Door
and
RST entries and trended above its 20 EMA all day, just like the
SPX.

Today’s
Action

After yesterday’s spike, the early futures
are
small red at 7:00 a.m., with the S&Ps -2.60, Dow -17 and Nasdaq -4.50,
and any
follow-through into the holiday weekend mark-up would be best if there is
some
early downside and enough to shake the weak longs that carry profitable
positions overnight. Any early decline below the midpoint of the
(
SPY |
Quote |
Chart |
News |
PowerRating),
which is 110.78, would be enough to accomplish the mission. The SPY closed
at
111.85, and yesterday’s high was 111.98, with the low at 109.60. The 50-day
EMA
is 111.75 and 89-day EMA 111.61, so that is an early reversal line should
the
futures manage to turn green and open up. The upper channel down trendline
from
the 116.95 top (1163 on the SPX ) is 113.50 – 114. If that is reached on any
advance into mid-June, this corner would sell out-of-the-money calls again
for
the fifth month since the programs started with the February
options.

For you new
sequence course members, I
enjoyed
your questions last night, and as a follow-up, you should check your
standard
deviation channel today for the 5 – 5, 20 – 30 and three-month to see the
extension for the different time periods. In the 5 – 5, the 3.0 is 112.25,
the
2.0 is below the closing price of 111.85 at 111.70. That ties in with the
50-
and 89-day EMAs.

Moving to the 20 – 30, the 2.0 is 111.85 and
3.0
113.25. For the three-month, the 1.0 is 112.50, the 2.0 is 114.50 and the
3.0 is
116.75. Follow these different charts today and see how the 5 – 5 and 20 –
30
levels change dynamically intraday. You have to weigh any intraday short
setups
against the front end of this holiday weekend, so that means tight stops,
and
the better intraday shorts would be after any gap-up opening, which the
early
futures don’t indicate yet. Also, don’t forget to tie in the extensions of
the
last leg down on your five-minute chart from 110.76 – 109.60. The ones in
play
are 111.92, 112.20, 112.63 and 113.24. Watch these levels along with the
standard deviation band levels. You should also tie in today’s SPX
volatility
band levels vs. the SPY levels mentioned above. If any SPX volatility bands
are
hit, look for confluence with your SPY levels.

I hope this mini lesson answers some of last
night’s questions, or those that were not asked. FYI:  Do this for any
of
the major indices/HOLDRs that you trade.

The QQQs closed above the 50- and 89-day EMAs
at
35.65 and 35.76, and initial resistance is 36.25 – 36.50 with the
three-month
2.0 band at about 37.25.

Have a good trading day,

Kevin Haggerty

PS Don’t forget the
conference call
 today after the close.