Time To Frame The Levels

September 6, 2000
Kevin Haggerty

The
S&P 500 dropped 0.9% as
the buyers walked away but not due to major selling. The advance/decline ratio
was a push and the volume ratio was still 50. Institutional blocks were 18,014
and total volume was 848 million. The S&P 500 has rallied for 25 days at
+8.2% from the July 28 low of 1413.90 to the September 1 high of 1530.09. It
closed yesterday at 1507.09 in the bottom of the range and below the low of the
high day on a wide-range bar.

This makes yesterday’s low
of 1503.75 a pivot point for today. During this rally it is significant to note
that there is yet to be a three-day pullback and most of it has been above not
only the 50- and 200-day EMAs but also the 10-day EMA. After
a significant high or low swing point is confirmed by a one-day change in
direction, it should be habit for you by now to frame the index or stock.

The S&P 500 cash frames
out as follows: .38: 1486, 50-day EMA is 1483, .50 retracement level is 1472,
.618 is 1458, .786 is 1439 and the 200-day EMA is 1433, so you can see we have
convergence in two places there. These
are alert zones for pullback trade opportunities if you can identify buying
pressure at one of these levels.

This is historically a very
volatile time during September and October but it means excellent short-term
trading opportunities. During the first half of the year, brokerage analysts are
usually very high on their estimates, as are the individual companies. When
reality doesn’t support the estimates after seven or eight months, the analysts
are all scrambling to lower their estimates and by the third quarter ending
September, you can get many major companies giving earnings warnings.

It shouldn’t be a surprise
to any of you that after report-card time, the buyers disappear. The Generals
take a rest and the front runners have sold out at a profit, so who is left? The
only possible buyers at that point are the retail who bought into the
end-of-the-month move by listening to the media dribble that follows every
significant move.

Don’t buy the hype. Buy the
pullback when the buying pressure reveals itself again and the Generals return
if in fact the story is still strong.

The Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
ended yesterday -2.7% and is now off 3.9% from the September 1 high of 4147
which was a 22-day rally, and up +24.1% from the August 3 low of 3342. Framing
the NDX, we get the following levels:

.38: 3841, 50-day EMA: 3810, .50 retracement level: 3745, .618: 3650, 200-day
EMA: 3587, and .786 level: 3514.Â

The NDX also had a
wide-range-bar close below the low of the high day and closed in the bottom of
its range at 3987. This makes yesterday’s low of 3986 one of today’s pivot
points for continuation shorts which also could give you a long rally entry if it
then reverses the 3986 low to the upside. Unless
this is the beginning of a significant downside move, both the NDX and SPX will
more than likely test their swing point highs.

face=”arial, helvetica”>(September Futures)
Fair Value	size=2>Buy	size=2>Sell
2.75	3.85	1.45

Pattern
Setups

Have a great trading day.

Time To Frame The Levels

BUY THE FEAR, SELL THE GREED

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