Anticipate, To Participate

November 10, 2000
Kevin Haggerty

The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) continues to diverge positively
from the
Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) which made
another lower high and a lower low yesterday of 2923.10 before an excellent
rally from a key alert zone. The S&P 500 had rallied from 1305.79 to 1438.46
and closed above the 200-day EMA and right at the .618 RT level. During
this latest selloff in the Nasdaq momentum stocks, the S&P 500 has yet to
close below even the .38 retracement level of 1388, as it finished the day at
1400.15. The intraday low was 1369.68, right at the big .50 RT level, but the
rally from there carried it back to the top of the range.

Markets are perverse and if
something has a chance of happening, it usually will, as evidenced by the
current political situation. Just another reason why naked position trading
without options strategies never made much sense to me and makes even less now.
Yesterday was another excellent trading
day for daytraders. First there was an explosive contra rally in most of the
chosen ones which, hopefully, you anticipated in your trading plan. You had
ample warning.

There were some good
Trapdoors and excellent Opening Reversals in such stocks as
(
BEAS |
Quote |
Chart |
News |
PowerRating),
(
MERQ |
Quote |
Chart |
News |
PowerRating),
(
NEWP |
Quote |
Chart |
News |
PowerRating) and many others. After the big gap-down opening,
followed by the contra rally which was multipoint but short in time, the major
averages headed south early, led by the NDX 100. When
the NDX broke 3000, you should have been on alert for a possible upside reversal
from the .50 RT level of 2940. You
should have kept the framed numbers from the 10/98 low of 1063.27 to the 3/24/00
4816.35 high right on your desk, as I suggested you do on more than one
occasion.

If you were prepared to
anticipate in the key alert zone, you were looking for reversal patterns
accompanied by changing market dynamics. If you hadn’t prepared, you were either
out of the market or choking on a position or two that had become a hope trade
because you didn’t adhere to your risk management.

The NDX 100 hit an intraday
low of 2923.10 on the 1:45 p.m. bar and was followed by a wide-range-bar close
in the top of the range and above the previous two highs. Those of you — and I
hope it’s all of you — that are looking at the new screens, would have
recognized it as a 3-Day-Wake-Up-Call pattern and because the wide-range bar had
a higher low and high, it was also a Change in Direction.

FYI, the high of the low
bar was 2938.51, so the wide-range bar recrossed and closed above the 2940 RT
level. The rally by the NDX 100
from the recross of 2940 to the 3057 close was 4%. The move from the intraday
low was 4.6%.

The NDX 100 index gave you
both the 3-Day-Wake-Up-Call and Change-in-Direction patterns, while at the same
time the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s gave you a three-day reversal pattern. For those of you that
attended the seminar, it is called Kings and Queens, which is two wide-range
bars back-to-back with a setup bar closing in the top of the range. The Qs did
just that on big volume and your entry was above that bar’s high ofÂ 73
5/8. The Qs traded up to 76 5/8 after entry without even a close stop out.

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
8.65	9.85	7.40

Pattern
Setups

With the volatility we now
have, it’s almost all intraday setups due to the gap openings, but you must
still prepare your daily plan from the daily charts.Â

For those of you that know what today
is, I wish you a happy birthday and Semper Fi.

Have a good trading day.

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Anticipate, To Participate

BUY THE FEAR, SELL THE GREED

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