Drugs Turn Green
After an early
up in the S&Ps preopening Monday, they quickly went minus as the
bonds sold off. By 9:45 a.m. ET, bonds were off 21 ticks, the Dow minus 100
points, S&P 500 cash minus 12 points, and the cash ended the day minus 9.
The Morgan Stanley High Tech Index made a few positive tries in the afternoon
but was negative most of the day, as well as the semiconductor index, which was
red all day. The drugs turned green about 11:30 a.m. ET and the retail index was
green all day with the annual Christmas hype.Â
They threw Gap Stores [GPS>GPS] away
from 52 5/8 down to 30 13/16, or 40%. And now they want to take it back up.
Remember what I said in prior commentaries: Growth stocks sell off and then they
are called value stocks, only to become growth stocks again. Gap Stores retraced
a perfect geometric pattern based on the prior move from the October 1998 lows
to the highs. This setup is an excellent position trade right now that is best
entered utilizing options strategies. I will expand on that in the book I’m
writing, which covers all timeframes as well as how the Generals play the
game.Â
The advance-decline ratio is oversold,
with the 5-day moving average of advances minus declines at minus 776. This
ratio is only comprised of the New York Stock Exchange common stocks, not the
one you generally see with all stocks on the exchange. The latter includes
preferreds, which interest rates affect. Also, the 3-day moving average of the
advancing volume divided by the advancing volume plus declining volume is at 52,
which is a positive divergence. But we did have a shortened day on Friday — with
light volume, that distorts the ratio.
The percentage of NYSE stocks over their
200-day moving average is down to 28%, which is awful relative to the S&P
500’s near-record close Monday at 1407.85. These are conditions that precede
good intermediate rallies. But coming right after new highs is negative. You
want to see that after a strong downtrend. It tells me the very narrow group of
major techs and the funny-money over-the-counter Internet and related stocks can
again pop for a day or so. And it is the end of the month, isn’t it?
I use the term “funny money,” not
because they are bad companies, as some will last and become the new Microsofts
and Dells. I’m referring to the manipulation and ease of movement that is
engineered by traders, Generals, and momentum players, each with their own
agenda. There are no market makers in the way to attempt making an orderly
market like the NYSE specialist is obligated to do. A few of them commit capital
only to the biggest of the Generals. And if they don’t have a block position in
the stock, they are no better than a hedge fund trying to make money vs. your
efforts — except they can sell short on minus ticks, and you can’t. They fought
like hell to keep that rule and that edge, because the SEC was talking about
taking it away from them and didn’t.
Program
Trading NumbersBuySellFair
Value5.103.104.00
Pattern Setups
If we go south, short reference
points in the indexes are as follows: OEX below 747.08, second entry below
744.17;Â QQQs below 152.58 and a possible entry if we trade up to Friday’s
low of 154.75; Diamonds below 109.40, second entry 108.64, and Spiders below
140, which is a breakout of a 9-bar consolidation range. On the long side,
pattern setups include Home Depot [HD>HD] and Wal-Mart [WMT>WMT]. The
three momentum retail flyers Monday, Best Buy [BBY>BBY], Circuit City
[CIR>CIR], and Tandy [TAN>TAN], all did their thing. But keep in mind,
Wal-Mart and Home Depot are the two largest and the most widely held in the big
Generals’ portfolios–they will make them go higher if the market goes. Also,
PSINet [PSIX>PSIX], Sun Micro [SUNW>SUNW], Dell [DELL>DELL] above Friday’s high, Procter
& Gamble [PG>PG], Johnson & Johnson [JNJ>JNJ], and Merck
[MRK>MRK].
Also, if you haven’t checked the Market
Bias Indicators page, we’ve got CVR I and CVR III buy signals.
Have a good trading
day.