Again

• January 31, 2002
• Kevin Haggerty

After
yesterday’s action, our
initial outline of the week’s preparation has been covered top to bottom. First,
we had failure at the 1139.50 neckline from a rally at a Fib retracement,
1126.63, on the hourly chart. Next, we got the air pocket sell-off as the
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broke below 112, and yesterday we had an excellent rally from the .38
retracement zone. This level is 108.74 for the SPYs.

After two wide-range bars
down into the .38 zone, both closing below the open and at the absolute bottom
of the range, we got a wide-range bar upside reversal that closed in the top of
the range, above the previous two closes, and it was also a Change in Direction
bar, which is a higher high and a higher low. Entry was above the high of this
bar, which was 109. The intraday low was 108.40. The ensuing rally took it up to
a 111.87 close. It doesn’t get much better than that from a key alert level that
you were prepared for well in advance.

From low to high in that
rally was over 3.0% for the SPY. If you didn’t take it, you have other issues,
like listening to CNBC, getting wrapped up in the Tyco
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and looking at the screen seeing a sea of red as the reversal was happening,
which all led to not hitting the button. There is nothing out there that beats
sequence trading. You are probably all lined up to get those continuation long
entries today, but so is the world. Let’s hope the Generals keep the train
moving today, along with the program gangs, which were extremely active
yesterday, as the Generals played end-of-the-month jockey. Jan.
30 proved to be a good cycle date kickoff. Feb. 5 and Feb. 11 and 12 will also
be interesting.

NYSE volume expanded
again with end-of-the-month programs to 1.98 billion, with 1.27 billion up and
690 million down for a volume ratio of 65, and breadth positive at +674. The
major indices regained about 50% of the previous day’s losses, with the Dow
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$INDU |
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+1.5%, the SPX
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$NDX.X |
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SPX and NDX have made .38 retracements to the September low, while the DJX
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hit an intraday low yesterday of 95.29 vs. the .38 retracement at 94.50. 

The read is easy now and
major pivots are obvious on a short-term basis. We start with the 112 SPY level,
which is now resistance with the 50-day EMA at 113.86 and the 20-day EMA at
113.63. We might see a couple of pivot plays around 112 today which will provide
a test of your ability to change direction.

In the groups yesterday,
the
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continued its strength, with the
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$RLX.X |
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at +2.9% as sabers rattled. Both the
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regained about 30% of the previous day’s losses. The
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BBH |
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end of the .618 zone, then reversed to close at 118.60.

Stocks
Today

There are many setups
obviously after that reversal yesterday, but focus on
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SEBL |
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(
NETA |
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(
SNPS |
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(
CYMI |
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(
KRON |
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(
TEVA |
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WLP |
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FRX |
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DPMI |
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and
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DGX |
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In the brokers,
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JEF |
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(
GS |
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(
AGE |
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In retail,
(
BBY |
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(
KSS |
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and
(
WMT |
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In the banks,
(
FITB |
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and
(
STT |
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And in heavy machinery,
(
ITW |
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In the semis, look at
(
BRKS |
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(
NVDA |
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ISSX |
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(
MCHP |
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(
BRCM |
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In the biotechs, look at
(
MEDI |
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(
GILD |
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Also,
(
IBM |
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volume reversal day yesterday at the .618 retracement to the September low,
which was 87.49, so if the Generals come back for that today, you’ve got
to be ready. 

Have a good trading day.

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

Five-minute chart of
Wednesday’s NYSE TICKS