Action Reaction

January 29, 2002
Kevin Haggerty

After
an opening spurt of about 5 points up
toward the neck to an intraday high of 1138.63, the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) faded to
an intraday low of 1126.66 on the 1:00 p.m. bar. Yes. That’s right. You were
prepared for any reversal at this level. In yesterday’s
text, I said be ready at the 1126.63 level where “A-B” equals
“C-D” and also the .618 retracement to the 1117.43 low of 1125.86. For
a change of pace, the SPX rallied into the close at 1133.06, virtually unchanged
on the day.

We have Dubya and the
State of the Union tonight, which certainly put a hold on yesterday’s action.
Historically, the probability is high for a feel-good rally assuming he gives us
a “win one for the Gipper” speech. If we get the pop, it could be a
quick breakout of the head-and-shoulder neck and run up to the upper end of the
resistance mentioned yesterday.
There are several cycle dates kicking in starting on Jan. 30 through Feb. 12, so
we will see some combat duty during this stretch.

The
(
SPY |
Quote |
Chart |
News |
PowerRating)s are
trading in an eight-day box between 114 and 112. Below 112 there is an air
pocket. They closed at 113.82 vs. the 50-day EMA at 114.10 and 20-day EMA at
114.22. They ran up almost a point in yesterday’s afternoon rally from the
intraday low of 112.92. You have your framework of levels for any breakout of
the 1139.50 head-and-shoulder neckline, so you are prepared to react.

When you scan your S&P
500 and NDX
100 screens every morning, in addition to the 3
Day Wake Up Call and Change
in Direction screens, make sure you zero in on any sector/group that has
been moving in concert over the past five days. This tells you what the Generals
are thinking because you can follow the money. For example, over the past five
days, the Paper/Forest Products, Heavy Machinery and Homebuilding stocks have
been leaders, along with the Transportation stocks, like
(
CSX |
Quote |
Chart |
News |
PowerRating) and
(
NSC |
Quote |
Chart |
News |
PowerRating)
and a few of the Chemicals. Looks to me that the Generals believe things are
getting better.Â

In the semis, it’s been
the equipment stocks, led by
(
KLAC |
Quote |
Chart |
News |
PowerRating),
(
NVLS |
Quote |
Chart |
News |
PowerRating) and
(
AMAT |
Quote |
Chart |
News |
PowerRating) that are
rebounding during this bounce. FYI: The SOX, NVLS and KLAC have rallied from an
RST pattern. The SOX hits resistance at the 200-day SMA of 554, the 200-day EMA
of 561. It closed at 545.82. I mention the equipment stocks because they’re all
in the S&P 500. If you’re not doing these screens every morning, then it’s a
waste of time reading me because my interpretation of the world revolves around
the facts of buying/selling pressure.Â Â

Stocks
Today

Any kind of short trades
during the day that set up as intraday setups, utilize the index proxies or the
sector proxies.

Have a good trading day.

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

Five-minute chart of
Monday’s NYSE TICKS

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