Air Pocket II

October 30, 2001
Kevin Haggerty

The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
gave us a chance to use the 50-day EMA at 1097 as a downside pivot yesterday, as
the index traded through the level to a 1078 low, which was a moonshot for
daytraders. The NDX’s
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) actually high on Friday was 1487 vs. the
.786 level at 1492. It traded down to 1375, closing there. The Dow also hit our
shorting zone between 9500-9600 on Friday, with a high of 9598 vs. the .618
retracement level of 9532. It traded down to a low of 9270 yesterday, and that’s
where it closed.

The biggest air pocket
was where you expected it, which was the semis, where the
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) was
-7% on the day. On Friday, the SMHs hit a 39.35 high vs. the 39.90 .618 level
and traded down to a 35.70 low yesterday, -9.3% high to low.

The major indexes all
closed in the bottom of their ranges on expansion of range on just light NYSE
volume, relative to its average, and also right on their 20-day EMAs, which can
be used as pivot points short and/or long today. The QQQs closed at 34.04 vs.
its 20-day EMA of 33.90; the
(
SPY |
Quote |
Chart |
News |
PowerRating)s at 107.45 vs. 108.33; and the
(
DIA |
Quote |
Chart |
News |
PowerRating)s
at 93.06 vs. 93.

Continuation short
entries are obvious, and any follow through to the downside will be three-bar
reversals for the major indexes and should lead to at least a .38 retracement to
the September lows. The .38 level for the SPX is 1048, 1335 for the NDX, and
9014 on the Dow. I will post a table of downside levels on Wednesday if we get
downside follow through today, and that would make Friday’s highs be live swing
points to measure from.

One air pocket day
doesn’t mean a retest of the September lows is a lock from these levels. I say
that because the last two days of the month and the first three of the new month
is a historical strong period, and you must be alert to that. If for some reason
they find enough fools to buy more of the funny money techs, or the shorts
haven’t covered, then the retracement levels to the May highs become live alert
levels. Also, I firmly believe that there are games being played with the
futures at any significant sign of panic or meltdown, and it will continue
during this crisis period. As you
heard this morning, it’s full alert again by the FBI, and that only means no
news or bad news. You don’t win long on either one of them.

Stocks
Today

If they gap them down on
the early red I see now, then you’re thinking Trap Doors and volatility bands.
If they trade up some, then reverse yesterday’s lows on trade-through entries,
you play the short side. If you get and take early long trades, then take quick
profits and move to breakeven because the higher probability is that the
direction of the gap-down open will be the early primary trend.

I’m running out of room,
so have a good trading day. I’ve got to make this like Irish goodbyes because
they cut me off.

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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Air Pocket II

BUY THE FEAR, SELL THE GREED

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