Last Five Days Of The Month

August 25, 2000
Kevin Haggerty

The intraday
low for the S&P 500 was
just before 11:00 a.m. and then uptrended from there, closing at 1508.30. The
spread between the high and the low was 9.86 points, the narrowest of the entire
rally which started at the beginning of the end-of-the-month markup on July 28
and enabled good entry at a rising 200-day EMA. The
narrow spread had a neutral bias as breadth was a push, with advancers over
decliners by just +46 and the volume ratio slightly negative at 48. Total
volume dropped to 831million, as did institutional blocks, falling off to
17,904.Â

We have five trading days
left in the month, so I would expect the Generals to protect their overweighted
positions. The target that they have to shoot at is the .618 retracement high at
4089 that they’ve already hit. If they can get by that, the 4400-4550 level is
possible. Whether they do or don’t
is of no consequence if you have a delta-neutral position such as long the ATM
(at-the-money) puts (that assumes a delta of .50 for each put and long one
future).Â

The amount of puts is
determined by the delta. If the move is significant either up or down, which it
could be, the position will prove rewarding. There
are several other ways to utilize options strategies with a defined risk that
can accomplish your objectives of protecting against a seasonal surprise, but
still participating in most of any upside move.

I highly recommend you
spend the time to understand options, because the way the game is being played
now with many of the so-called blue chips being sold off or bought up by 20%-40%
on news, it is thin ice. It is a good feeling to arrive at your trading desk in
the morning hoping for an overreaction or crisis and you don’t care which way it
goes. You can sleep soundly with those kinds of positions. Take the time. Educate
yourself in order to stay on top of this game, because that is what it has
become with institutions trading like daytraders.Â

(
ARBA |
Quote |
Chart |
News |
PowerRating) made a good
move but it was a gap opening, as was
(
TXN |
Quote |
Chart |
News |
PowerRating), and neither of these stocks
retraced the previous day’s high, so that presented a different entry decision,
which was solely your judgment of the dynamics of both the market and the
specific stock. Gap openings that
don’t pull back in the first 30 minutes can be explosive moves when you are
dealing with a momentum stock like ARBA
and a semiconductor like TXN.

face=”arial, helvetica”>(September Futures)
Fair Value	size=2>Buy	size=2>Sell
5.30	6.50	4.10

Pattern
Setups

SMH, the semiconductor HOLDRs, trading
above par, 100, which is our favorite number; TXN which is consolidating at the
base of the trading tree just above the 50- and 200-day EMA. If the recovery in
semis is real, this is where the Generals will get aggressive in the stock.

I will be out of the office on Monday
as I will be returning from the TradingMarkets.com office in Los Angeles, so there
won’t be any commentary. Remember, next week is the end-of-month time, so your
trading plan this weekend should be to look for patterns in the key overweighted
techs and momentum stocks.

Talk to you all on Tuesday. Have a
good trading day and a better weekend.

src=”https://tradingmarkets.com/media/images/comms/haggerty/kh082500-01.gif”>

src=”https://tradingmarkets.com/media/images/comms/haggerty/kh082500-02.gif”>

Last Five Days Of The Month

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources