Daytrading Bias Is Best After Sharp Advance

NYSE volume dropped to 1.04 billion shares on

Friday as many Professionals bailed out early for the holiday. The major indices

were virtually unchanged with the SPX
(
$SPX.X |
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PowerRating) closing at 1198.78, +1.16

points (+0.1%), the Dow
(
$INDU |
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PowerRating) +5.0 points (+0.05%) to 10,543, the

+5.0 points (+0.2%) to 2076. The averages finished flat, but the volume ratio

was 63 and breadth +1208, which is positive, but on a holiday weekend, I

discount the significance of most numbers. Our focus has been primarily the

semiconductors and energy stocks, and they were the primary bright spot for the

negative for the week were the XBD, -1.5%, BKX, -0.6%, and PPH, -0.4%. The XLB,

+0.5%, and RTH, +0.2%, both underperformed the SPX, which was +0.8% on the week.

The leaders of the bull cycle since 10/02 have

been the SMH, +165%, XLE, +143%, XBD, +139%, and XLB, +100%. For the major

+66%, and
(
DIA |
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PowerRating), +60%. The next bear cycle bottom will probably be in late

2006 or early 2007, so how much time do you think you have left in this current

rally game? Time’s a-wasting, and you better have a plan on how you are going to

handle the next cycle down for positions other than daytrading.

The primary question coming into June is whether

the Generals can push this squeeze to higher highs. The sharp angle of advance

during this rally means that there will probably be a sharp air pocket decline.

There are a few time zones, one of which is the 1.272 time period calculated off

the 10/25/04 and 04/20/05 lows, which is 06/03/05, +/- two days. Sharp angle

advances usually result in sharp declines, so don’t let the squeeze rally cloud

your market judgment, which simply means don’t buy the past week’s highs from a

longer-term position standpoint.

Have a good trading day,

Kevin Haggerty

P.S. I will be
referring to some charts here:
www.thechartstore.com in the future.