Earnings Volatility

  • January 16, 2001
  • Kevin Haggerty

We are
pleased to announce that Kevin Haggerty’s audio commentary is again available
each morning from 8:30 a.m. ET.  


The
S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) after three up days, backed
off 0.6%, while the
Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) closed at 2506, which is -0.7%, after a four-day upside
run. The NDX has rallied 24.2% low to high in eight days. The 2547 swingpoint
high was exceeded on both Thursday and Friday, but the NDX couldn’t close above
it. The SOX, which has led the NDX 100, has advanced 35.2% from its 11/30 low to
Friday’s high of 699. It closed at 670.73, which is above its 10-, 20- and
50-day EMAs but as with most techs still below its 200-day EMA.


There continues to be a
discounting process while some debate the bottom of the averages and this has
been highlighted by the Semis’ +35% move in addition to stocks such as
(
CC |
Quote |
Chart |
News |
PowerRating),
(
BBY |
Quote |
Chart |
News |
PowerRating) and now
(
LTD |
Quote |
Chart |
News |
PowerRating) which is starting to run. The Generals also got an
early start on some of the mundane housing-related stocks like
(
SHW |
Quote |
Chart |
News |
PowerRating) and
(
LEG |
Quote |
Chart |
News |
PowerRating)
which have had strong accelerations since mid-December pullbacks. They put in
bottoms in late September and mid October. The Generals continue to pursue
normal business cycle-sector rotation.


My answer to the most
common daily question, “What do you think for today and this week?” is
threefold:

  1. I don’t have to
    think, but just react to what the Generals do. The trading plan is prepared
    in advance each day with inflection points both long and short. You do this
    by checking your weekly, daily and intraday charts. For the daytrader, the
    question is, “Where is my earliest entry on the intraday chart both
    long and short, and is there any convergence with a higher time frame?”

  2. Barring any overt
    announcements, weakness on Friday usually carries over to Monday over 60% of
    the time. 

  3. This is an earnings
    week for some key stocks that could have a significant news effect on the
    indexes and/or specific groups. In the Semis, you have
    (
    INTC |
    Quote |
    Chart |
    News |
    PowerRating)     and
    (
    AMCC |
    Quote |
    Chart |
    News |
    PowerRating)
    today, with
    (
    AMD |
    Quote |
    Chart |
    News |
    PowerRating)     on Wednesday and
    (
    ALTR |
    Quote |
    Chart |
    News |
    PowerRating)     on Thursday. Today you
    also get three key financials:
    (
    BAC |
    Quote |
    Chart |
    News |
    PowerRating)    , which has been under a recent
    cloud,
    (
    C |
    Quote |
    Chart |
    News |
    PowerRating)     and
    (
    COF |
    Quote |
    Chart |
    News |
    PowerRating)    . Other key techs this week are
    (
    IBM |
    Quote |
    Chart |
    News |
    PowerRating)     on
    Wednesday,
    (
    MSFT |
    Quote |
    Chart |
    News |
    PowerRating)     and
    (
    SUNW |
    Quote |
    Chart |
    News |
    PowerRating)     on Thursday. You can also throw in
    (
    ITWO |
    Quote |
    Chart |
    News |
    PowerRating)
    which is one of the chosen ones which reports Wednesday. 

I would say with all of
this potential implosion or explosion, what else can you do but react, as a
daytrader?

(March
Futures)

Fair Value

Buy

Sell

11.60

  12.95 

 10.20 

Pattern
Setups


After Friday and the recent
three-day rally, there are not many good setups on the daily charts but a few
that did are
(
BRCD |
Quote |
Chart |
News |
PowerRating),
(
CIEN |
Quote |
Chart |
News |
PowerRating),
(
CMVT |
Quote |
Chart |
News |
PowerRating) (above Thursday’s high),
(
RATL |
Quote |
Chart |
News |
PowerRating),
(
PAYX |
Quote |
Chart |
News |
PowerRating),
(
JNPR |
Quote |
Chart |
News |
PowerRating) (above Thursday’s high) and
(
ORCL |
Quote |
Chart |
News |
PowerRating) using the
200-day EMA as your upside pivot point. Also
(
SANM |
Quote |
Chart |
News |
PowerRating), for which you can also
use the 200-day EMA as your pivot point.


The one specific group
that’s obviously been going pretty strong together is the Semis. They have
earnings this week, as I mentioned before, and any kind of activity in that
group will provide excellent volatility on an intraday basis. On the short side,
the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s will be an easier read on the intraday charts if it gets nasty
today. 


Have a good trading day.