Drano!

After
opening up yesterday, the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
gave us
a
flash Trap Door move down, starting with the 9:50 a.m. bar on your five-minute
charts at a high of 2634.37. After four bars down with consecutive lower highs
and lows and a 2555.31 low (which was a quick -3% for the professionals to take
back their shorts), you got a narrow-range inside bar and top-of-the-range
close. 


The rally started above the
high of that bar. The index rallied nicely to an intraday high of 2670.53 by the
11:05 am. bar. That was a +4.5% move, so whatever inventory was taken on after
covering their opening shorts was scaled up at higher prices by the
professionals. “Thank you very much, have a nice day,” as it goes.

Don’t get me wrong. The professionals
commit risk capital and oftentimes endure pain before gain, so they are entitled
to the reward. The hook is that crowd psychology being what it is — one of
overreaction — and the major benefit of order flow, is why everyone wants to
own market makers.


The decline from 2670.53
took the index down to a 2520.14 low by the 2:10 p.m. bar, which was a -6% move
and less than 1% from the 2496 .618 retracement level. (See my Nov.
24
commentary for these various levels.) This key zone generated a rally
from 2520 into the close of 2603. This was a +3.3% run and of course positive
going into the close.
The
volatility was excellent and the index went -3%, +4.5%, -6% and +3.3%, for a
16.8% travel-range day. FYI, the index closed at only -0.7% for the day. It
doesn’t quite tell the story, does it? 


The game remains on the
intraday charts. If it can happen, it will, and it did. At 4:05 p.m.,
(
ALTR |
Quote |
Chart |
News |
PowerRating)
guided revenues lower, as resales were lower than expected, and
(
GTW |
Quote |
Chart |
News |
PowerRating)
also disappointed. At that point, the slide began. The NDX futures
were down over 100 points in minutes. It doesn’t take much in Globex to make
that happen. By 5:00 p.m., they hit 2465 or -5.8% from the 4:00 p.m.
close. 


The Qs were trading at 61.5
in the aftermarket, and that equated to 2460 on the NDX index, right in the
lower end of the alert zone. This is the opportune time for big players to
influence a stock as there is no liquidity in the extended hours and crowd
psychology is rampant. Get those prices ready for the next day’s opening.


When I left at 6:00 p.m.,
the NDX futures were trading at 2475 and the S&Ps at 1326. ALTR had closed
at 25.9375 and was offered at 18.5.
(
XLNX |
Quote |
Chart |
News |
PowerRating)
was offered at 34.75 after a
close of 43. Many other key stocks were off 5%-10%. It didn’t matter that ALTR
was already down 59% from the 67.125 9/1 high and that Lehman had already put
the slam on it, along with XLNX, at the beginning of this week. I’d say the
surprise was anticipated well in advance by many of the Generals. GTW, before
last night, was down 58% from its July high. 


This current tech crash has
bracketed many stocks in the -50% to -75% zone. I don’t wish a big early down
today for those of you that are long, wrong, or unhedged, but for the flat at
night or hedge traders out there, today will provide many different trade
opportunities in the various techs and chosen ones. The futures action will
accelerate the travel range and you can trade the tape both ways. If the ice is
too thin for you in some of the active stocks, then focus on the Qs, SPYs, DIAs
and SMHs.


Prepare your opening
trading plan. What will you buy as a partial position entry on a gap down
opening? What are the volatility bands, etc. You can bet that, if possible, the
openings will be very beneficial to the professionals as emotional herd
mentality will get a steep discounted price.














face=”arial, helvetica”>(December Futures)


Fair
Value


size=2>Buy


size=2>Sell

4.00


5.30

2.90


Pattern
Setups


Forget about any setups today and just
plan your opening strategy and follow-up strategy.
Don’t
even go to the bathroom without being flat!


Have a good trading day. Please keep
your helmet on. Keep your stops tight. Don’t take your full position size on
your entries and keep your finger on the ejection button!