? Or !

July 27, 2001
Kevin Haggerty

Two in
a row, which has been an
unusual occurrence recently. All of the major indexes finished up, led by the
NDX 100, +2.8%, and the S&P 500, +1.0%. There were across-the-board gains,
with the Russell 2000 +1.7%, and the Mid-Cap index +1.6%. As you know, we are in
that end-of-the-month time frame, so there is always a big increase in program
activity, which accelerates any real activity by the Generals. I have seen some
large program action this week, both ways, and I can tell you the Generals are
not lined up on the buy side yet, telling their brokers, “Stay with it,
bud. I’m not getting my share of the volume.” There is no question they are
picking their spots, but it is just probes at specific levels. They have
adjusted their game plan to buying the weakness and rolling out of some
“on-the-quick” upside moves. Bottom line right now is that they are
trading more and investing less while sitting on significant cash. When they
come back for real, there will be price and volume persistence. We are not there
yet.

The erratic movement is
great for traders, as there are some excellent percentage swings both ways over
very short time periods. Compound the money, thank you. Programs, Generals and
the media drones with their daily hype are a trader‘s
best friend. Volume was decent yesterday, at 1.2 billion, slightly above
average. The volume ratio slipped some to 68, while breadth was again good at
+756 advancers over decliners. The volume ratio on the Nasdaq picked up to 73%
from 53%, and also breadth to +597 vs. +157 the day before.Â

There were continuation
long entries in most stocks yesterday at all levels. We had
(
BMET |
Quote |
Chart |
News |
PowerRating) follow
through to new highs on a trade-through entry, and on the other end,
(
NVDA |
Quote |
Chart |
News |
PowerRating)
gave us a rush from an excellent pattern right at the 200-day EMA. It ran over 7
points from entry. For NVDA, was it short-covering, Generals or both? The trader
just says, “Who cares?” and plays queen for a day. The fool will say,
“I don’t believe it,” and went out short overnight, trading what
should be. The fool may be very right, but which way would you prefer to play
the game? I say the reward to risk is infinitely better by taking the
continuation trade in the direction of the move.

The NDX, after an early
move up, gave us an extension move down to the 1605 intraday low and also the
.618 retracement to the previous day’s 1582 low. Then, to be even nicer to
traders, it gave you a 1-2-3 entry above the 8-period moving average of the
high, and we had another afternoon rush stronger than the previous day. Oh, I
forgot to mention. No indicators or commentators needed for the trade. Just
Change in Direction at key alert zones. The QQQs ran from 40 to 41.90 on the
move.Â

(September
Futures)

Fair Value

Buy

Sell

4.50

5.75

3.35

Stocks
Today

There are certainly long daily chart
setups after yesterday, but it is probably fool’s gold to take first entries on
any extended stocks, but you can on stocks still tightly wound that can trade
above the previous day’s high. I would certainly look for intraday pullback
trades on yesterday’s advancers that had significant volume. And you might even
look at some contra-move shorts if we have any early morning gaps.

Have a good trading day,
and remember, there will be program activity both ways today, so don’t
fall in love with the market one way or the other.

Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Thursday’s NYSE TICKS

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? Or !

BUY THE FEAR, SELL THE GREED

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