More Tail-Wagging
More Tail-Wagging It was an explosive rally yesterday, as the S&P 500 gapped open through the swing-point high of 1308.90 and the spiders (SPY) opened at 132.43, which was almost through the down trendline of 1325-1330 level. You had no chance on a trade-through basis.
Specialists are constantly going to open these stocks as high as possible when there is an emotional overreaction in the futures. The specialist’s logic is simple: Take the stock to a level where there are sellers. Why bleed a slow death (they have to get short on the way up) by not gapping it so much? It’s not their fault; it’s the pre-market manipulation of the futures that causes it, and the retail investors they say they’re so concerned about get fleeced every time. You saw the herd mentality yesterday as the institutions couldn’t buy them high enough on the opening. We are, of course, in the last two trading days of the month, which is always report-card time for the funds.
| The S&P 500 closed at 1342.44, above the down trendline, and above the last two swing-point highs |
By the way, did you happen to see the revised Gross Domestic Product numbers, that are controlled by…guess who? Bubba’s boys, not Greenspan. Sounds like Bubba wants the economy to be his legacy and will protect the economic numbers with one sweep of the pen, if need be. (Good for us little guys.)
Last night I sat and watched AOL trade to 132 in the funny-money ECN late-trading market, and the other major Nets are coming on strong this morning. INTC is up over 3 1/2 as retail buys it up and market makers say “thanks.” The S&P futures are up 13 points early, so it looks like another tail-wagging-the-dog opening.
 |
| Figure 1. Standard & Poor’s Depository Receipts (SPY), five-minute bar. A long, narrow consolidation (Slim Jim) in yesterday’s SPY. Source: Quote.com.
|
Slim Jims were all over the five-minute charts yesterday, as it was an uptrending day. The afternoon trend was a long Slim Jim, about as long as I’ve seen this year in the spiders (see Figure 1)–nice trade on the breakout. The herd mentality dominated as the broker-dealers, insurance and banks were yesterday’s stars because the herd is under-weighted and worried about missing the move and must shown them at the end of the month. The semiconductors rallied back after some recent weakness.
Pattern Setups Of The Day Watch Altera [ALTR>ALTR], Merck [MRK>MRK], Vignette [VIGN>VIGN], Voicestream Wireless [VSTR>VSTR], Exodus Communications [EXDS>EXDS], RF Micro Devices [RFMD>RFMD], Qualcomm [QCOM>QCOM] and Nextel [NXTL>NXTL], which we had yesterday as well.
| Program Trading Numbers | ||
| Buy | Sell | Fair Value |
| 8.60 | 6.10 | 7.30 |
One last reminder: Don’t chase anything today. Look for second entries and pullback entries.
If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his series of tutorial articles.