Market Nears First Key Test

  • August 9, 2002
  • Joe Corona



While Kevin Haggerty was on vacation, Joe Corona, Senior Trader for Tony Saliba,
wrote our lead morning piece. Thanks, Joe.


Yesterday’s rally was quite impressive
on
several different levels, but the one that impressed me the most was the
collapse of implied volatility in the Nasdaq-related volatility indices. The
VXN (The CBOE Nasdaq Volatility Index,
pictured below) opened damn near on the high of the move and proceeded to get
reamed all day for a massive 9.49 point loss from the previous close and an
11.90 point loss from its highs!


Daily chart of

(
$VXN |
Quote |
Chart |
News |
PowerRating)

The QQV
(AMEX Nasdaq 100
Volatility Index — see chart below) also took its beating, dropping 8.81
points from the previous close and 11.59 points high to low!

Daily chart of
(
$QQV |
Quote |
Chart |
News |
PowerRating)

Charting volatility is
somewhat suspect, but you don’t have to be much of a technician to see the
possibility of monster head-and-shoulders tops forming in the VXN and QQV.

We are now set up for tests of the old “month end markup” highs of July 30 /31.
I would expect the market to back and fill as we approach these levels because
this is probably the first level from which the bears will launch a significant
counterattack. When we get there it should be a significant battle with a lot
of heat, noise, and volatility. 


Key Levels To Focus On:


Dow
(
$DJI |
Quote |
Chart |
News |
PowerRating): 8762 set July 30


S&P 500
(
$SPX |
Quote |
Chart |
News |
PowerRating):
911.64 set July 31


Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating):
1354.4 set July 30


Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating):
992.34 set July 30 (roughly 24.70 in the
(
QQQ |
Quote |
Chart |
News |
PowerRating))


Russell
(
$RUT |
Quote |
Chart |
News |
PowerRating):
402.32 set July 30

How are we playing it? Repeat after me: This is a bear market!

Thanks for putting up with me for two weeks. Happy trails!


Joe