Contracting Volatility Will Be Resolved

June 5, 2001
Kevin Haggerty

The
market got its Monday holidays confused, trading
only 75% of its average daily volume in a narrow-range day which closed at
1267.11, which is also inside of its previous trading range. Total volume was
just 838 million but the volume ratio was positive at 64 and advancers led
decliners by +892. The last hour was also up for the S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating), while the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) formed a Symmetrical Triangle from 12:30 p.m. into the close. That
will be resolved today. The top side is about 1845 and the bottom approximately
1833. The index closed at 1838.84.

Both the SPX and NDX gave
us good contra moves after the first three bars, the first two being wide-range
bars up on a gap opening, then a reversal bar. That move was an excellent
opportunity, as were the long entries in both the NDX and SPX off the intraday
lows. Both indexes gave you inside-bar setups followed by 1,2,3 close entries
which was followed by the 1,2,3 higher-bottom entry.Â

If you didn’t take any of
them, then take the week off because you are not in the game. The
short contra play, then the defined entries off the intraday lows in both the
NDX and SPX were both textbook seminar plays — and they happen day after day —
simple Change in Direction patterns followed by some continuation plays.Â

When combined with the
dominant sequences (which I will review at the Las Vegas seminar), you have
something to do every day. If you’re playing Nintendo in your Level II in a
choppy tape, then that’s exactly what will happen to you most of the time — get
chopped up and your pockets will get lighter.

The Nasdaq was even quieter
yesterday, trading about 72% of its average daily volume with breadth slightly
positive, as was the volume ratio. Thirteen of the major Travel Range stocks had
changes of less than 1 point — a rare day indeed. The NDX closed at 1838.84,
just above the 1768 sell-side pressure point and just below its 20- and 50-day
EMAs which are 1873, each rounded off.

The Generals will resolve
whether we kiss the upside resistance first or come out the bottom and start the
Fib retracement early. You are ready to hitch a ride on either or both the SPX
and NDX when they do. Make up your list of potential. shorts and their entry
levels, along with some coiled patterns ready to go on the upside and then we
wait for the Generals to start the train.Â

If you don’t want to go
through this drill, then buy a straddle on the QQQs which will provide you many
opportunities to trade against it after a reactionary move in either direction.
Don’t attempt this unless you are educated in options and the attendant risks
that go with them.

Stocks
Today

Programs will be
unavailable until early next week.

Â Have a good trading day.

Five-minute chart of yesterday’s S&P 500 (SPX) with 8-,
20-, 60-
and 260-EMAs

Five-minute chart of yesterday’s NYSE Ticks

Contracting Volatility Will Be Resolved

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources