Today’s Pivot Point: 50-day EMA

September 11, 2000
Kevin Haggerty

The
S&P 500 finished the four trading days last week at
-2.2%, while the NDX 100 with its ever-expanding trading range and volatility
was -6.9% net for the week. The S&P 500’s low last week was Friday at
1489.90 and its exact .38 RT level is 1486, while the 50-day EMA is 1483. The
NDX after its reflex rally off of the almost exact .38 retracement level, closed
at 3813, just above its 3812 intraday low, and is the lowest close for the past
10 trading sessions. It also closed below its 50-day EMA of 3816.86.Â

The 50-day EMA is a
starting pivot point for you today for either a continuation short or a reversal
of the 50-EMA to the upside. Combined with market and stock dynamics intraday it
will serve as a good starting inflection point. For example, on Friday I had
mentioned that if
(
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PowerRating) reversed its previous day’s low of 207, it would
be a good short. It did exactly that — not once, but twice.Â

The first time was on the
9:45 a.m. bar on your five-minute charts, as it traded down to 199 before they
ran it back up to 207 1/2 by the 11:35 a.m. bar. Then it reversed the 207 low
again, trading down to its intraday low of 195 1/4 by the 3:20 p.m. bar. There
were 19 1/2 points of tradable short range, so just being able to capture some
of that range makes for a good day.

For those of you who
attended the seminar, the reversal below 207 was a 1-2-3 close pattern without a
second swing point. It had two wide-range-bar reversal days, then the
narrow-range reflex rally inside day, closing in the top of its range. This
setup an either/or pattern for a continuation long entry or a short, on a
reversal of the inside day’s 207 low. Not magic, just keeping it simple and
following the buying or selling pressure above or below inflection points.

The NDX 100’s .50 RT level
is 3745, and if the 50-day EMA doesn’t generate some buying, we could see that
in a flash today. A knife move down to that zone could provide another quick
rally or more, so you should be ready for it.Â

With September/October fear
season on us and the early warnings coming fast and furious, many
portfolio managers obviously have one foot in and one foot out of the tech
bathtub. Afraid to miss the upside
and fall behind their peers, yet scared to death of the downside airpockets
because they are still so overweighted, especially the 30-and-under age group of
managers.Â

There is nothing for me to
say about the overall environment, because I have mentioned in previous
commentary that the August-October time should have been hedged out, starting
with a minimum of one third in August and by now after the rally you should be
100% hedged. If there was no down during this time frame and the market ran 20%
to the upside with you only capturing 12%-15% due to the cost of insurance,
would that be so bad? Especially since you have such substantial gains in your
401Ks and IRAs. I prefer to only lose 5%-8% on the downside vs. the 20% or
whatever the percentage meltdown would be.

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
24.10	25.60	22.60

Pattern
Setups

For those of you doing the RSTs from
the seminar, the next buy setup won’t occur until below 3342 for the NDX and
below 1413.90 for the S&P 500. It is possible if we go sideways for a period
of time that we could form above those lows but it would take some real
short-term volatility both ways. If they form below those lows on a meltdown
during September and October, it would be an excellent entry level for various
strategies.

Have a good trading day.

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Today’s Pivot Point: 50-day EMA

BUY THE FEAR, SELL THE GREED

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