Bulls, Bears, Biotechs And Semis

November 27, 2001
Kevin Haggerty

There was plenty of
intraday opportunity in the semis and biotechs. The brokers put in a gain of
+1.2% with
(
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(
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at 1.088 billion and a volume ratio of 61 with breadth only +172, so it was
narrow. The ratio of up volume to down volume never really got above 1.6 during
the rallies yesterday, which is on the weak side.

The futures controlled the
major indices yesterday as they traded in a very geometric pattern. We had two
defined trend trades yesterday. For example, the SPX traded its first leg up to
1155.53 vs. the 144-day EMA at 1155. It then traded down to 1146.17, the 1.414
Fib extension of that first leg. From this intraday low, it traded up to 1157.88
on the 3:15 p.m. bar, vs. the 1.27 Fib extension at 1158.05. It closed at
1157.42.

As you see from yesterday’s
text, the first confluence of resistance in play is 1153-1160; the next one is
1174-1208. Using your framework of alert levels, you are always looking for
intraday setups on your intraday charts as they enter the alert zones. It
doesn’t matter — long or short. We haven’t gotten a reversal pattern yet on the
daily charts so nothing to do in position until that happens.

Yesterday was another day
of rising prices and declining volume. The Generals continue to play in the same
sandbox which is the semis and biotechs, both of which gave us many intraday
setups yesterday. Most of the semis ran +5% to +7%. The
(
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declining 11.1% to the 20-day EMA on a five-day pullback have now rallied back
+9.6% in three days from the 39.75 low. They closed at 43.24 on significant
volume on a gapped day where the entire range was above the previous day’s
range. This of course puts us on alert for continuation trades today if the game
is on and they try to challenge the 44.70 high and the .618 retracement level of
44.36.

The biotechs led by
(
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blew out the top of its consolidation on the fourth time through. AMGN, the
largest weighted stock in the BBH HOLDRs, is +16.4% close to close, in just
three days. The
(
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in March at 92.51, retested in September with a .786 retracement to 101.31 and
have broken above a five-month down trendline on your weekly chart and also,
more importantly, above the 30-week EMA which had flattened out and is now just
starting to rise. The 10-week EMA is, of course, rising and above the 30-week
EMA. The BBHs closed at 139.80 with the 30-week EMA at 127.22 and the 10-week at
129.54. Any pullbacks will be aggressively bought by the Generals.

The
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above 44.70 — will break the six-month weekly down trendline and above a
flattened-out 30-week EMA. The 10-week is rising, but still below the 30-week.
Neither the semis nor the major indices such as the SPX have had the same retest
as the BBHs. They are the leaders of this next bull market.Â

Any pullback in the
SPX will probably be contained by the government and by the Generals, who will
certainly paint the tape to get the major indices up or close to up by year end.
That’s the obvious which rarely happens, but it doesn’t matter much for those
that took position longs in the last big alert and cycle zone and have now hedged
these positions. You are ready to proceed either way.

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