The Greenspeak Effect
Alan Greenspan has taken every opportunity to warn you there’s an equity bubble and you’d better protect yourself. The media parades different people every day who give you a dance about .2 this and .1 that in regard to constantly revised economic numbers. That’s not what it’s all about. From his testimony yesterday, it’s pretty obvious Greenspan is very concerned about the stock market.
With the erratic behavior of the bonds, coupled with the S&P futures, totally dominating short-term movement in stocks, it’s extremely important to manage your risk. Volatility, after all, is what enables you to trade, but it is also what takes you out of the game if you don’t manage risk correctly.
There’s nothing much to say about yesterday’s tape, other than it was a Greenspan knife down, and the triggers on the S&P futures and bond futures were pulled once again in reaction. The wide-range down bar that occurred in the S&P futures as soon as Greenspan started to speak said it all.
The S&P 500 and Dow both hit their 50-day exponential moving averages yesterday, bounced and closed just above them. Techs made a larger down move, with the NDX off 63 points, but it had also been more extended than the other averages.
The S&Ps are up early today, the NASDAQ generals are up. . .the sun is out. . .it’s Friday, so maybe some of the analysts who four days ago loved Texas Instruments at 155 3/8 and IBM at 139 will like them even more at 136 and 124, respectively. Look for some upside reaction; there should be some good opportunities, especially in the big-cap techs. The best tape would be one that opens around yesterday’s close, trades down a bit, and makes a move back above the opening.
Target Stocks Of The Day  Three techs to watch that don’t set up on daily charts but could be good trades as soon as they make an intraday high or upside move on positive volume are Cisco [CSCO>CSCO], IBM [IBM>IBM], and Texas Instruments [TXN>TXN].
Stocks that set up after yesterday (there weren’t many) include Legato [LGTO>LGTO], VISX Inc. [VISX>VISX], SDL Inc. [SDLI>SDLI], DSP Group [DSPG>DSPG], MMC Networks, [MMCN>MMCN] and Veritas [VRTS>VRTS]. These are all high relative strength stocks that should do well on any kind of rebound.
| Program Trading Numbers | ||
| Buy | Sell | Fair Value |
| 10.90 | 7.10 | 8.95 |
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.