Early Game

December 13, 2001
Kevin Haggerty

The
SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) and Dow had
their first plus day in the last five, but just barely, as it took an afternoon
rally in a choppy session to get back to even and +0.1% for the Dow. The NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) and Nasdaq were up for the second consecutive day and closed at
+0.5%. Most of the tech-related sectors finished green. NYSE
volume was the second biggest in five days at 1.417 billion, or 15% above its
average. The volume ratio was below 50 for the fifth straight day at 45. Breadth
was still slightly negative at -95.

Both the SPX and DJX have
pulled back five days after hitting their 200-day SMAs for the first time since
August, and also a 24% rally in the SPX and +26% in the DJX. Three- to eight-day
pullbacks in this uptrend are a necessity if it is to go further into the
new-money investment period in January. This, of course, isn’t what the “I
don’t want to own them at 10, but have to at 30″ crowd wants to see. They
think the parabolic upside is just around the corner again. Let them buy the
emotion up, and you play the pullbacks. It’s easier on the pocketbook for
traders with finite funds.

The SPX held its recent
swing-point low of 1125.51, with an intraday low yesterday of 1126. The 50-day
EMA is 1125.76, and this is exactly where the afternoon rally started on a 1 2 3
higher bottom of 1127. The SPX closed at 1137.07, which is above the mid-point.
Any early sell-off must hold these lows, or the futures will accelerate the
downside below 1125.51. If they take out this low on a flash move down and then
reverse this low to the upside, get long for a trade with a stop just below it.

As a sector, the semis
had multiple stocks closing in the top of the range, but the Generals’ volume
wasn’t there in size. Nevertheless, they set up as continuation longs today as
buyers return. No entry, no loss. The
(
BBH |
Quote |
Chart |
News |
PowerRating)s held the 50- and 200-day EMAs,
reversing them to the upside, and closing in the top of the range. They didn’t
have the same top-of-the-range buying pressure throughout the sector as did the
semis. This is a needed pullback in the biotechs that has seen the BBHs gain 39%
from the September low.

Stocks
Today

In the energies, if they
play the fear game today,
(
SLB |
Quote |
Chart |
News |
PowerRating).

Have a good trading day.

Five-minute chart of
Wednesday’s SPX with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Wednesday’s NYSE TICKS

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