Consistent Reaction

August 22, 2001
Kevin Haggerty

Yesterday
we got the pre-Greenspan runup prior to announcement, and then the unloading of the futures after the
obvious 1/4 point cut that had been built into the Fed funds futures pricing for
quite some time. Seventy five percent to 80% of these announcements in this
declining market have ended the same way.Â

During the early up period,
the Financials, Biotechs and Basics were green as we got good long entry in
almost the entire list from yesterday’s text. The Semis with a few exceptions
stayed red most of the rally part of the day.
(
NVDA |
Quote |
Chart |
News |
PowerRating) broke out of the Slim
Jim to the downside, then later reversed it to the upside. There are many
different players that try to push this stock around on a daily basis, in
addition to any normal institutional activity.

The futures raid after
Greenspan was swift, with the Dow declining 224 points or -2.2% from the high,
to close at 10,174, and the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) from 1550 to 1481 or -4.4%. The
NDX got the expected overshoot of the .786 zone mentioned in yesterday’s text,
while the S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) ran out of time and closed at 1157 before
sliding more towards the 1131 .786 zone.

I was hoping for that to
happen this morning, setting a table for a good minor cycle low. Right now at
7:15 a.m. ET, the S&Ps are +8 and the NDX futures +25, so it doesn’t look
like a gap down opening yet, but as you all know, the pre-opening futures
activity is a game and can change quickly. We will find out whether the Generals
follow through with any selling during the first hour and a half this morning.

That’s correct — the
Generals didn’t rush in to sell tons of stock yesterday afternoon
post-Greenspan, but the futures raid accelerated what there was, plus shook the
retail tree and any short-term traders. There is plenty of Generals’ cash out
there and many are afraid they might miss a move, so this minor cycle low has
potential to be explosive through Labor Day.Â

Net, Net: You need the Change in Direction day with volume and broad sector
participation. It’s easy to anticipate with options strategies but not outright
longs until you see which way the train leaves the station.Â

There are barely any real
daily chart long setups after yesterday, as evidenced by the fact that 90 of the
NDX 100 stocks finished in the bottom of the range. You don’t need me to pick
out the continuation short setups. Just check that index this morning and pick
those stocks that are below all of their declining EMAs, because at the end of
the month the Generals do not want these dogs in their portfolios at report
time.

(September
Futures)

Fair Value

Buy

Sell

2.65

Â
3.75Â

Â 1.45Â Â

Stocks
Today

As I look at the futures,
those numbers remain consistent — I see green throughout the Techs, and also in
all the dogs, the CIENs, etc. It looks like we’re going to have an up opening.

Have a good trading day.

Five-minute chart of
Tuesday’s S&P 500 with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Tuesday’s NYSE TICKS

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Consistent Reaction

BUY THE FEAR, SELL THE GREED

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