Be Ready For Reflex Rally

September 7, 2000
Kevin Haggerty

The NDX 100 (as evidenced
by the QQQs) and the S&P 500 hit the .38 retracement zone yesterday with the
NDX closing at 3838 vs. a .38 RT of 3841 and the S&P 500 closed at 1492.25
vs. a .38 RT of 1486. The NDX proxies, the QQQs, closed at 95.81 vs. .38 RT of
95.83. Keep in mind the retracement levels are zones, +/- 0.5% – 1% around the
exact numbers I have given you.Â

Yesterday’s selloff to this
first zone puts on alert today for a reflex rally, because we have no clue
what’s in store for us regarding any further correction. We know where
yesterday’s lows are in the stocks and indexes, so continuation shorts are
obvious if they take them down again in the techs.

The total volume increased
to 997 million and there were 357 advancers over decliners, while the volume
ratio was also positive at 51. Institutional blocks jumped to 21,602. Needless
to say, the action in volume centered on the techs. For example, AMCC has
declined 15% in two days, while PMCS is down 12.3% and SUNW is -9.1%, and there
are many others with similar mark-up runoffs after the month-end game.

These are the kinds of
stocks you should be looking at today for reflex rallies. A dip below
yesterday’s lows and then a reversal of that low to the upside is an example of
an entry using the low as a pivot stop. If we start out on minor gaps up, seeing
that the S&Ps are up 5 points now, then a reversal below yesterday’s lows
would put you in on the short side again, using the low as your pivot stop.Â

In summary: You should be
prepared for a continuation short, reversal of short and go long, or the first
intraday buy pattern on your intraday charts, if these OTC game stocks run up
early.

The Micron
(
MU |
Quote |
Chart |
News |
PowerRating) saga
over the past few days should be a lesson to you on what has become an
embarrassment to the business, but certainly gives you insight on how the game
is played. On 9/1, Dressner K. Benson puts a buy out on MU; 9/5 S.G. Cowan
starts MU with a buy rating and a $125 price target. These price targets are a
joke, and one of the major reasons that retail investors get buried. The media
accelerates the problem as they blast it to all the hypnotized watchers who
don’t have a clue and run out and buy the stock. Yesterday, 9/6, DLJ comes out
and degrades MU and puts a $50 price tag on it. Hello?

The stock opened down 7 1/4
points or 9% at 71 1/4 on 1.3 million shares, and closed at 68 13/16. It is
pretty obvious that the DLJ analyst had more clout with the Generals than the
other two firms. Prior to the DLJ downgrade, Micron averaged 4.6 million shares,
average volume per day between 822 and 829. The stock traded between 93.44 and
87. After closing at 88 on 8/29,
Micron traded down to a 78.31 close on 9/1, with average volume of 6.6 million
shares. Get the picture? An increase of about 43% in volume with declining
price. On 9/5, Micron closed at 78 1/4 on only 4.3 million shares, so it is
evident that the Dressner and Cowan buy touts did nothing, but you can bet that
some of the Generals had early warning that things weren’t rosy at Micron.

That is how the research
business is conducted. The Generals pay big commissions to the top analysts at
the brokerage firms and also have large in-house staffs to stay on top of any
fundamental changes in the company. That is also why you must make the Generals
your research department by following the buying or selling pressure and ignore
the hype. I am sure you will always remember Qualcomm
(
QCOM |
Quote |
Chart |
News |
PowerRating).

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
24.75	26.25	23.25

Pattern
Setups

Have a good trading day.

src=”https://tradingmarkets.com/media/images/comms/haggerty/kh090700-01.gif” width=”454″ height=”295″>

src=”https://tradingmarkets.com/media/images/comms/haggerty/kh090700-02.gif” width=”454″ height=”295″>

Be Ready For Reflex Rally

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources