Expect More Volatility

• March 12, 2002
• Kevin Haggerty

Triple
Witch Week got off to its unusual volatility start. The
SPX
(
$SPX.X |
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PowerRating) traded in a narrow five-point range all day until a buy
program from nowhere struck at 2:00 p.m., right at about the previous close of
1164.31. This move ran quickly to 1173.03, which is pretty strong weekly
resistance for the SPX. It then backed off to close at 1168.26, which is right
at the 233-day EMA. Many stocks that broke out of the abundance of Slim Jims ran
1 to 1 1/2 points, and most of them fell back to where they started. You will
see this kind of action most of the week.

As I do this at 6:30 a.m.
ET, I see that the S&P futures are off  7 1/2, the Nasdaq 16, and the
Dow 56. That game is, as you know by now, subject to fast change. I repeat from
yesterday, be alert for Slim Jims, volatility bands, and any sharp moves to
support or resistance which can set up good intraday trades. In addition to
Triple Witch volatility, we have a few cycles kicking in this week, so keep your
helmets on and don’t fall asleep on your watch.

NYSE volume was the
lightest of the past five days at 1.2 billion, the volume ratio positive at 61,
and the breadth was neutral at +94. At day’s end, the Dow
(
$INDU |
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green at +0.4%, the S&P 500 +0.3%. The Nasdaq volume fell below average at
1.75 billion, with a volume ratio of 55, and breadth slightly positive at +246.
The Nasdaq finished unchanged, with the NDX
(
$NDX.X |
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PowerRating) -0.1%.

After the price and
volume thrust for a consecutive time period, pause and decline should be
expected. The semis finally gave a little back at -2.4%, but certainly had some
nice Slim Jim moves when the programs showed up. After a sustained move, it is
no time for heroes, so be light and fast with your intraday trading. From the
S&P 500 and NDX 100 screens for Monday’s trading, the most significant
buying pressure came in the Cienas
(
CIEN |
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(
JNPR |
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GLW-type
(
GLW |
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On Friday it was the
selling pressure in the rails as some profit-taking was evident. That puts you
on watch as the rails pull back to see if the Generals come for them again. I
would like to mention that during this kind of volatility, it is prudent to stay
in the big-cap liquid names because slippage on entries and exits can be
significant. 

Stocks
Today

As I finish this at 7:50
a.m. ET, the S&Ps are now down 10, Nasdaq 32, and Dow 70, so it appears we
will certainly be in a Trap Door and volatility band game early on. 

Daily chart long setups,
and regardless of the early red, we must do the drill. Stocks that set up on the
daily charts are
(
BCC |
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(
IP |
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(
WY |
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(
DD |
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(
DE |
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PowerRating). That’s evidence of the fact that the basics have pulled
back some.

Also,
(
LIZ |
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(
GD |
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(
FD |
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(
GCI |
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(
PCAR |
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(
UNP |
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(
MENT |
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(
WHR |
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PowerRating).

On the shortside, I’ll
stay clearly with the index and/or sector proxies. They’re much easier to read
in this kind of volatility. 

Have a good trading day.

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

Five-minute chart of
Monday’s NYSE TICKS