The Key Focus This Week

The market action in the major indices on option

expiration Friday did not provide daytraders with much to work with as they

ranged fairly tightly all day with no real volatility overreactions, which good

daytraders capitalize on. The SPX
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was the fifth straight advancing day for a +3.9% gain on the week, leading all

major indices. The Nasdaq
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week, while the Dow was +3.3% and SPX +3.0%.

NYSE volume slid again to just 1.28 billion

shares, hurt in part by the pre-Greenspan-speech quiet period. The only primary

squeezed in many of the tech stocks last week on the QQQQ move through the

longer-term moving averages, but is now close to a stronger Fib retracement

zone. As you can see on today’s 120-minute chart, price moved through that 36.68

– 36.72 level on significantly declining volume, which is now support, so the

QQQQ might take a step back next week if the Generals are to push the seasonal

technology move higher to at least a 38.26 .618 retracement level. The DIA

(
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There is sequence at 106 (.618 retracement), 106.07 and 106.18. The downside

levels to watch are the 104 – 103.65 zone, which includes the 103.68 200-day

EMA, “523 Trend” 34 EMA at 103.72 and a gap. The sequence for the SPY
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is 119.33, 119.54 (.618 retracement) and 120.11.

The Transportation Index closed at 3621 right at

the 3619 .50 retracement to the 3890 bull cycle high, with the .618 retracement

at 3682. The initial 3890 high gave you an RST sell signal below 3859, which

traded down to 3348. The XLB (basic material SPDR) will also give us some

guidance this week as it made a low of 26.70 just below the major support at 27,

then rallied to 28.32 last Wednesday vs. its 233-day EMA at 28.10 and the

200-day EMA at 28.36, closing Friday at 27.89. Negative divergence here and

failure to get going above its 200-day EMA will be a red alert for sure in the

short term.

The Memorial Day weekend is upon us, and if the

Generals run the techs into the holiday, the shorts will choke on price and have

to scramble some more. Last year the SMH advanced four straight days into the

holiday weekend, going from a 36.34 low to a 39.87 high. Following the weekend,

it declined from 38.97 to 36.63 in the first three trading days of June. That

meant the techs, primarily the semis, are a key focus next week, and daytraders

will get lots of action because the “Game” is most likely on through the end of

the month. The better scenario would be some early weakness on Monday – Tuesday

to set up some more squeeze into the last five days of the month.

Have a good trading day,

Kevin Haggerty

P.S. I will be
referring to some charts here:
www.thechartstore.com in the future.