Eye Of The Storm

Looks like yesterday was the quiet before the storm. The tech and Internet issues led the NDX to a plus-50 finish, while the rest of the market was eerily quiet.

The Nasdaq Generals had solid days along with IBM, EMC, and MCI Worldcom. The drugs, retail, energy, and bank indexes were down all day. The basics did nothing, with the exception of Caterpillar [CAT>CAT], which made a nice move with good entry. The Russell 2000 was still shining, though, and was up the entire day.

The market finished with an inside day, and the narrowest range in the S&P cash all year. When volatility shrinks like that, it usually precedes a good move. We’re right at the highs, which also sets up an explosive move from here.

FORE stopped trading at 9:50 AM ET yesterday on a $35 bid by GEC. If you took this trade at the 25 1/16-1/8 level, e-mail us and let us know. Congrats if you did–it’s nice to get lucky when you do a little work.

Looking at the screen early on, the futures are up seven points, the OTC generals are green, we had E-bay’s earnings, we have AOL’s earnings, the media is hyping the Internet earnings and feeding the mania, so it certainly appears that, at least for the opening, we’re going to be up strong (the market will probably gap), so we’ll focus on the tech stocks. If they do gap up, wait for a pullback–you’ll get a second chance.

Target Stocks Of The Day  All these stocks are high relative strength momentum names that are right at their highs or set up in pullback patterns near their highs: Cisco [CSCO>CSCO], Texas Instruments [TXN>TXN], Ascend Communications [ASND>ASND], Lucent [LU>LU], LSI Logic [LSI>LSI], Tiffany [TIF>TIF], Qwest Communications [QWST>QWST], Solectron [SLR>SLR], Novell [NOVL>NOVL], Network Appliance [NTAP>NTAP], and Nextel [NXTL>NXTL].

For bottom fishing, you might look at Network Associates [NETA>NETA], which has been down the last three or four weeks but has put together two days of excellent volume (the stock closed up 1 3/8 to 14 yesterday). Obviously something is going on–either the company is buying or somebody has picked a level.

Program trading numbers  Buy: 9.92. Sell: 5.04. Fair Value: 7.48.

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.