25% Travel Range For NDX 100

October 12, 2000
Kevin Haggerty

Another
roller coaster with big volume and
a huge travel range for the
Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) which totaled about 25% including the gap-down opening. The
travel range went as follows: The NDX opened at 3708, -3.5% (welcome, retail).
Then the first rally was +2.8% by the 10:40 a.m. bar. The trend turned negative
as the Generals made their sell decisions and sent the index down -3.7% for the
intraday low of 3047. It then rallied +5.7% with many defined reversal patterns.
This rally took the index to an intraday high of 3221.Â

It was very similar to the
5.5% rally off the .618 RT zone on Monday. This rally didn’t hold, as the NDX
sold off 4.2% to 3086, then a quick 15-minute move of +2.6% and then -2.1% into
the last 15 minutes to close at 3100, -2.8% on the day. The 25% travel range
excludes some mini moves. I just counted 2% or more.Â

The name of the game for
specialists and market makers on emotional days like yesterday is to get it to
where it has to go in a hurry. Don’t fight the stock and take a stand. If you
are going to be wrong early, make if for the minimum amount of size. I will
cover this topic in Vegas.

The internals got a little
better yesterday in the Nasdaq with ratios of negative volume to
positive volume declining from 4.5 to 1 last Friday to 3.5 to 1 on Tuesday
and 2.5 to 1 yesterday. The S&P 500 also improved. About half of the 25 or
so chosen stocks finished green after some wild reversals which provided great
opportunity for daytraders but unfortunately extremely upsetting for position
traders.

The semis had a fast +8.5%
move as evidenced by the SMH HOLDRs which opened at 57.75, down 4.3%. As I said
before, take it to a level. The HOLDRs managed to trade as high as 62.70 before
the fade closed at 59.95. The brokers were being thrown out again until Morgan
Stanley eased fears about junk bond rumors. Shorts and maybe some real buyers
scrambled as the stocks retraced everything and then some.

I have included several
charts for your records. The first is SUNW’s reversal-entry pattern which is
typical of a fear move. The stock reversed six closes, four highs on a
wide-range bar with a top-of-the-range close off the intraday low. Entry was
above the 98 1/4 high of the WRB and the stock rallied to 106 1/4. I have also
included the weekly charts of the S&P 500 and NDX, framed from the 10/98
lows because if the May lows are violated, they come into play.Â

The NDX low of 2897 still
stands, while the S&P 500 5/24 low of 1361 was violated yesterday on an
intraday-low basis to 1350. It closed at 1364.60 or -1.5%. If the move down is
the same as the decline from 4816 to 2897 or 40%, then the corresponding
parallel movement on a percentage basis from 4147 takes the NDX 100 down to the
2500 level which converges with the exact .618 RT level framed from 10/98.
If you are scaling into a long market
position from cash, you probably want that to happen. If you have been long all
the way down and didn’t hedge anything, then it is obviously not the desired
scenario.Â

The NDX is still looking
for its first close above the high of the low day since the 9/28 3725 close, and
the index hit a 3047 intraday low yesterday which is -18.2% from 3725. Needless
to say, it’s an excellent discipline if you are picking a level to put some
money to work. A change in direction and close over five days is certainly
more significant than one, and so on. You look for the internals to be heading
in the same direction. My opinion — and it is not worth anything because I can’t quantify it — is that the major averages like the S&P 500 and NDX 100 will make substantial
upside seasonal moves and most investors will do nothing until most of the
premium in the move is gone and will be unduly influenced by the media with
headlines like, “Worst Nasdaq Market Since 1973-74,” etc.Â

Steve Moore of the Moore
Research Center, which is an excellent site, has done extensive work in the
seasonal probabilities of upmoves in the major averages and when I see, for
example, a 94% probability of gain in the S&P futures from the end of
October through the middle of January with 17 winning years out of 18, I pay
attention and devise a strategy with a defined risk to participate. The website
is mrci.com.

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
15.00	16.40	13.95

Pattern
Setups

Have a good trading day.

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25% Travel Range For NDX 100

BUY THE FEAR, SELL THE GREED

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