Watch For Volatility, Follow-Through
I hope everyone has recovered from yesterday. The CPI was basically unchanged and everyone got excited. Around 8:30 AM yesterday the S&P futures ran up +15 and the bonds +30, then the bonds fell back to +15 and finished +7–something of a disappointment. But maybe it was a little bit of reality. Greenspan is speaking again today, and that probably kept the bonds from getting too exuberant.
The S&P finished strong, up 29.25 to 1330.40, close to the swing-point high test level. The Dow rallied 1.8% and the NASDAQ closed up 4.27%. The big techs led the way with the NDX finishing the session up 5.3%. What was significant was that volume improved to over 800 million, breadth was excellent and the up volume/down volume ratio was better than two-to-one. Institutional participation was clearly evident: The number of 10,000-share blocks increased to 16,837 from 14,096; the elephants were definitely in the game.
Today and tomorrow should be volatile, with Greenspan today and triple witch on Friday.
One note: Whenever I mention a 50-moving average, I’m always using an exponential moving average (EMA). The difference between it and a simple moving average can be fairly significant, especially in volatile markets. Keep that in mind if you’re looking at some of the charts I mention.
Key point 1: A stock or market that rallies on no news is much stronger than one that moves because of hype, like yesterday. Key point 2: Stay away from the opening. Only take trades when the stock trades through your entry point. You’ll often get a second chance when it pulls back; it’s the same as getting stopped out and entering again on a re-cross of your entry point.
Target Stocks Of The Day  Some Dow stocks that have set up if we get follow-through include Alcoa [AA>AA], Dupont [DD>DD], AT&T [T>T], and Wal-Mart [WMT>WMT], over last night’s high and crossing the 50-day EMA.
Some NASDAQ stocks that could move if you get entry are Intuit [INTU>INTU], Go2Net [GNET>GNET], Applied Micro Circuits [AMCC>AMCC], Uniphase [UNPH>UNPH], Adobe [ADBE>ADBE], Ciena [CIEN>CIEN], Advent Software [ADVS>ADVS], and Triquint Semiconductor and [TQNT>TQNT].
Program trading numbers  Buy: 15.40. Sell: 10.85. Fair Value: 13.35.
One point about the program numbers: You’ll see a lot of program activity because of triple witch, and you might see some of the brokerage firms come in on the buy programs around the 13.85-90 level and sell programs around 12.10-15. This because the brokerages will be doing some of their own programs, and they don’t have to pay commissions–their costs (and thus their levels) are different. How can you tell when it’s happening? When it gets to these levels, watch the action, watch the ticks; program size will often be 10 million, 20 million, occurring in a flurry and then disappearing.
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.