Nasdaq Has Biggest Travel Range Ever
Yesterday we had the
big early down in the
S&P 500 cash and it traded down to 1378 in the morning and then a rally
through the 1385 support-and-retracement level to close +2.7 points at 1402.11.
The Dow, led by some of the oldies, finished +125 points or 1.1%. The tech-laden
NDX (Nasdaq 100) had its biggest travel range ever, giving us a high of 3576 and
a low of 3372 before closing in the top of its range at 3507. face=”arial, helvetica”>A 5.7% intraday range is high for a major average,
needless to say.
As I speak, the S&Ps are down
10 points after having been down 18 1/2 points earlier. The big fear in this
market with extreme valuations that portfolio managers are scared to death of is
higher interest rates and earnings starting to falter. face=”arial, helvetica”>There is no room for error. face=”arial, helvetica”>If both rates continue to rise and you get too many of
the Computer Sciences [CSC>CSC] and Gateways [GTW>GTW] that we have
today, we’ll have that 25% correction that
that forever-bearish Byron Wien of Morgan Stanley foresees. The good news is that
it will probably do it very quickly, as you can well imagine. It only took two
days for the media to emphasize the fear and, as usual, magnify
it.
With the early down on the Futures
today, you should again be looking for trap-doors, opening reversals and, if we
are lucky, some more opportunities that the CSC specialist and choking
institutions gave us yesterday. As long as
it isn’t fraud or accounting irregularities, these magnified gap openings
provide the best trading opportunities you can get.
| “A 5.7% intraday range is high for a major average, needless to say.” |
CSC is a high RS value stock,
closed Tuesday at 92 5/8 and opened at 77 1/4 yesterday. It traded back up to 87
1/8, closing at 86 1/8. DLJ had cut it to
outperform because it was fully priced and also the company said they saw the
fourth-quarter revenue lower than a year ago. Earnings of course were still
up. Again, no room for error — everyone
wants better-than-expected. size=2>The specialist maximized the opportunity with the S&Ps down early
and the momentum portfolio managers selling at any price to clean their clocks.
The stock opened at 77 1/4 and was up several points in less than 10 minutes.
The initial indication was 68-71. Then it worked its way back to 74-78 before
closing at 77 1/4. This increase to higher indication was positive because it
still left over a 16% gap down from the 92 5/8 close and it gave you an
indication that the sellers thought it was a little ridiculous at the lower
prices to make those sales but they still made a ridiculous sale. They don’t get
enough volume when they force the stock down like that.
When you play these gifts on the
opening, you must enter a market order to buy on the opening because a limit
order has no standing on the opening. So once again, we have to thank the
specialist and those institutions that forced the opening for making our
day.
Yesterday the VIX traded to its highest
level since Oct. 15 preceding a large rally. The VIX put in a reversal day
yesterday by opening at 29.80, making a high of 31.02 and then closing below the
open and below the previous day’s close. It also closed back under its Bollinger
band which is a 20-period, two-standard-deviation band at 28.14, giving us convergence of two
indicators.
Look for the rallies today, look for
them early and be careful on your entries.
| href=”01032000-3257.cfm”>Program Trading Numbers | ||
| Fair Value | size=2>Buy | size=2>Sell |
14.95 | face=ARIAL,HELVETICA>16.15 | face=ARIAL,HELVETICA>13.75 |
Pattern
Setups All high momentum stocks:
Omnipoint [OMPT>OMPT], VoiceStream [VSTR>VSTR], Qualcomm [QCOM
>QCOM], Conexant [CNXT>CNXT], NextLink [NXLK>NXLK], Redback
[RBAK>RBAK], and Emulex [EMLX>EMLX]. Also, in the drugs, take a look at
Merck [MRK>MRK] (going over yesterday’s high for a continuation entry).
Again, these are all high relative strength momentum stocks, so be careful and
you will be better served to use the second-entry tactic, or only half of your
normal size on the first continuation entry above yesterday’s high. They may
have their buying shoes on today. In addition to the shorts that will scramble,
these momentum stocks have some fuel in their tanks.
You got to love the volatility. Stay in
there and keep your wits about you.
Have a good trading
day.