Averages Back To Their 50-day EMA’s
  With last week’s down moves of 2.7% in the Dow, 4.4% in the S&P 500 and 6% in the NASDAQ, the market has retraced around 50% of the rally from the May 27 lows.
The averages have retraced back to their 50-day EMAs, awaiting direction from institutional money. Remember, moving averages don’t stop the stock market; only decisions to use cash or raise cash can change the direction of the averages. Having said that, most corrections retrace one-half to two-thirds of the previous move before resuming the prior trend (if more, it’s a potential trend reversal).
When these retracements interact with the 50- and 200-day moving averages, it’s wise to pay attention, because if the market is going higher short-term, the 1350-1330 level could be a strong launching pad. Right now, sit back and wait for the generals to commit or raise cash before you play the game.
The Dow and S&P were down all Friday, but the NDX reversed and finished at the top of its range (up 20 on the session), which sometime precedes a rally the following day in the S&P. It was a nervous tape, with sell programs in charge, but the overall volume was very light at 635 million shares. With the futures down over 7.5 points (around 8:25 AM ET), it doesn’t look like we’ll get an early rally. I don’t know what the news is, I don’t care what the news is; the bottom line here is that the market has been down four days in a row, the specialists are obviously not short stock at this point. Look for Trap Door openings (emotional gap down openings that are reversed when institutional buyers, program buyers and the specialists come in on the long side).
Target Stocks Of The Day  Watch for opportunities in IBM [IBM>IBM], Cisco [CSCO>CSCO], EMC [EMC>EMC], Nortel Networks [NT>NT], Texas Instruments [TXN>TXN], Applied Materials [AMAT>AMAT], Legato Systems [LGTO>LGTO], RealNetworks, [RNWK>RNWK] Dell [DELL>DELL] and Qualcomm [QCOM>QCOM].
| Program Trading Numbers | ||
| Buy | Sell | Fair Value |
| 10.45 | 6.75 | 8.60 |
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.