Anticipation

August 27, 2001
Kevin Haggerty

The
(
NDX |
Quote |
Chart |
News |
PowerRating)
has risen +7.6% in the three
days from Aug. 22, which was the first day in the 22-24 minor cycle low period.
That also coincided with the .786 retracement zones for both the NDX and
(
SPX |
Quote |
Chart |
News |
PowerRating),
in addition to an extremely oversold TRIN and an extended option proprietary
indicator that I have maintained since the CBOE started in 1973. The announced
catalyst and reason after the fact was Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating) which, coming at the
same time as the strong convergence above, Friday provided you with a fun day.

How far can this go?
Answer: Don’t know, and neither does anyone else. Second question: Is this the
bottom? Answer: Any answer would be subjective and couldn’t be quantified, so
what good is it? We can say there is plenty of institutional cash and we are
coming to the end-of-the-month report card time and a long weekend, so there is
some room.Â

Next question: Should you
have taken a long trading market position already? Answer: Yes, you should have,
i.e., QQQs, SPYs, DIAs, etc., and because it is against the downtrend and a
contra-trade, you should have utilized an options strategy that defined your
risk.Â

The NDX closed at 1580,
which is right on resistance at previous swing-point lows. The 20-day EMA is
1592, and the down trendline at the 50-day EMA is right above at 1665. A rally
to the 50-day EMA would extend the move to +13.4% and a larger one to the
declining 100-day EMA of 1783 would be a rally of 21.4%.Â

For the SPX, which closed
at 1185, the DTL is about 1195Â and the 50-day EMA is 1200. The next level
of resistance is at the 100-day EMA, which is 1220. I point these levels out so
you don’t get too excited and jump in right into resistance. There will be a
pullback, and keep in mind there is a strong converging cycle period in the late
September/early October period. If the Generals are serious in here, the semis
are well positioned for a significant move. The 200-day EMA has been flattening
out for the
(
SMH |
Quote |
Chart |
News |
PowerRating)s, which closed at 46.21, and the 100-day EMA is at 47.21
and the 200 up at 53.78. They have advanced 10% in three days. The
biotechs
(
BTK |
Quote |
Chart |
News |
PowerRating) have had a good run on decent volume, but we are now up
against the head-and-shoulder neckline resistance and the 100-day EMA, which is
125.53. They closed at 126.57, that’s utilizing the BBHs.

The basics are certainly
a sector you want to see run with the semis, and they have perked up again and
have given us some decent trades recently.

(September
Futures)

Fair Value

Buy

Sell

2.25

3.45

1.00

Stocks
Today

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

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Anticipation

BUY THE FEAR, SELL THE GREED

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