Elephant Watch
It was great to meet some of you subscribers at the Money Show in Las Vegas on Monday and Tuesday. I have already heard from some of you about trading online the correct way, and I’ll do my best to assist you. Let’s catch up a bit.
We failed to get a volume follow-through in the S&P 500 above its 50-day moving average, running into resistance at the 1335 level. Tuesday’s close below the low of the swing-point high day of Monday, June 7 confirmed 1336.39 as a swing-point high. Tuesday’s 1317.30 close below Monday’s low of 1325.84 also confirmed the change in short-term direction. Key point: A move above 1336.39 in the S&P on any volume could trigger a run to the 1375.93 high. You can play that move with the SPDRs or E-mini S&P futures.
The institutions are sitting on their hands as the media and every Fed governor or wannabe voices subjective opinions on rates. A move below the 50-day moving average of 1316.32 and the June 8 low of 1312.89 will surely mean a test of the 1277.30 minor low. You can also play that downside break with the SPDRs (which you can sell short on minus ticks).
This volume decline has nothing to do with “summer doldrums.” The portfolio managers have one foot out the door and are concerned about overcrowding at the exits to lighten up. May through October is not a friendly season to begin with, and when you add in the current 6% long bond rate and high valuations, it means a very nervous market. Yesterday’s volume was about as light as the pre-Memorial Day Weekend. Today and Friday it’s the economic numbers, and then they’ll tell you it’s earnings season again as the excuse. I said it the other day: The institutions must come back in volume for the market to rally. When they do, we’ll see them coming and react.
At the end of the day, the S&P 500 was flat, the NASDAQ, led by the big techs, finished +49, and the Dow had dropped 75 points. The techs made a nice recovery after being bad-mouthed by a major brokerage firm analyst on Tuesday, but we certainly need more than a one day up, next day down pattern to regain momentum. As far as risk goes, it means intraday trades are better than two- to five-day trades.
Around 8:30 AM ET, the S&P futures are off 8.5 points and bonds are off 15 ticks, so we could have a rocky opening.
Target Stocks Of The Day  I’m looking at some of the major techs from yesterday. But remember, we need follow-through. If we get it, the following stocks have set up good patterns: EMC [EMC>EMC], Cisco [CSCO>CSCO], Hewlett Packard [HWP>HWP], Microsoft [MSFT>MSFT], which made a nice move out of a range last week, and Sun Microsystems [SUNW>SUNW].
Other setups include Alltel [AT>AT], Genzyme [GENZ>GENZ], Staples [SPLS>SPLS], and Dollar General [DG>DG].
Program trading numbers  Buy: 1.85. Sell: 0.20. Fair Value: 1.00. These are program numbers at which brokerages can execute without commissions (for the June contract).
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.