Choppy Moves

August 1, 2000
Kevin Haggerty

We
ended the seven months ending July 31 with
all three major averages still in negative territory as money-market returns are
best, year to date: the Nasdaq -7.4%, the S&P 500 -2.6%, and the Dow -8.5%.
August through October, historically, is
not a friendly three months on a net basis. Yesterday, we got a reflex rally
from the relentless selling of the past three days that has all three major
averages and, of course, many key
stocks now playing the game at the 200-day EMA pivot point.

The rally lacked a
significant increase in volume, with total volume at 953 million, but not so
unusual after the past ten days down. I call it calculated reluctance to step
in. Breadth was good at +548 advancers over decliners and the volume ratio
jumped to 59. In spite of the recent selloff, the percentage of New York Stock
Exchange stocks above the 200-day moving average remains at 56%, which certainly
highlights the institutional purge of the extreme overvalued stocks, as opposed
to retail leaving the market or redeeming mutual funds, which creates aÂ
different kind of selling.Â

There are some good
setups today with top-of-the-range closings, and at or above key moving
averages. This makes it easier to select trade opportunities, but we obviously
need some continuation. The moves
are very choppy and it is easy to get stopped out, only to see the stock end
higher. Second entries become very important in this kind of nervous tape.

(September Futures)

Fair
Value

Buy

Sell

11.00

12.20

9.75

Pattern Setups

Because of the day we had yesterday,
I’ll give you more names than usual to take a look at.

Also the QQQs set up right at the
moving average with a top-of-the-range closing and for those of you who attended
my seminar, RSTs are setting up in both the QQQs and SPYs.

Have a good trading day.

Choppy Moves

BUY THE FEAR, SELL THE GREED

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