Early Signs Point North

As of yesterday, the S&P 500 had rallied five daily bars off its 50-day exponential moving average (EMA) to new highs, then pulled back two bars with selling in the techs, Internets, and drugs. Yesterday was a little disturbing as the retail stocks jumped onto that list. But again, there are big profits in those stocks; that was the first down day where there was some real gusto and extra volume.

Breadth continues to expand, and the up volume has topped the down volume every day this week, with institutional re-allocation continuing (as evidenced by the one billion shares that traded yesterday).

The profit-taking in the retail stocks should probably hold down around the 50-day moving averages (unless we get into something like we saw in the techs), but we’ll let the stocks tell us that. But look for some patterns in those stocks early next week.

With the S&P futures up over 8.5 points around 8:30 a.m. ET, it’s looks like we’ll start out strong. If the QQQs (the NDX SPDRS), which closed at 106 3/4 yesterday, trade above yesterday’s high of 107 3/4, look for intraday high consolidation breakouts in any of the large techs. If we have the short-covering/rally day it looks like we might have, take the first breakout out of consolidation in any of the NASDAQ generals or high-momentum/relative strength NASDAQ stocks, because they will fly. The first break out of an intraday consolidation is always the best.

Target Stocks Of The Day  Some stocks that setup yesterday
and look promising today are America Online [AOL>AOL], Qualcomm [QCOM>QCOM], Altera [ALTR>ALTR], Harley-Davidson [HDI>HDI], United Technologies [UTX>UTX], a narrow-range consolidation I mentioned yesterday, and Rockwell [ROK>ROK], which popped a little bit yesterday and could continue today.

Also, if American International [AIG>AIG] re-crosses its 50-day to the upside after a wide-range down bar yesterday, it could stage a short-term rally. Look for an intraday consolidation breakout on your five-minute chart.

Program trading numbers  Buy: 9.22. Sell: 4.36. Fair Value: 6.76.

Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.