Florida Opening

November 22, 2000
Kevin Haggerty

I hope
you caught it both ways yesterday. The
early pre-opening was green and the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) and S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) jumped up on the first two bars and then gave you Opening Reversals as
both averages headed south. The NDX took out Monday’s 2779.78 low, trading down
to the intraday low of 2745.70, just above the 11/13 low of 2742.47. The index
then turned on a dime, reversed the low and traded up to 2844.55, which proved
to be the intraday high.

The S&P 500 did
essentially the same thing. It gave you the Opening Reversal, took out the
Monday low, then reversed that low, trading up to an intraday high of 1355.87.
That was a nice pop of over 14 points after reversing the low. Monday’s lows in
both the NDX and S&P 500 were prime targets (as I mentioned on Monday) to
get run in by the professionals so they could shake the tree, get long and make
a nice play back up. I
congratulate them for a job well done!

The rally reversing the
lows was with declining volume, larger-than-advancing volume the entire time,
and the breadth was negative also. That’s not the kind of dynamics you want when
a market is groping for some kind of stability. The afternoon rally ended just
before 3:00 p.m. and both the NDX and SPX declined into the close as the volume
ratio deteriorated even more, falling to 46 before the run off. The NDX had
turned red, as it closed at 2786.65, which was another low close, after having
hit an intraday high of 2844.55.

I obviously did not like
the closing action but the first hour was right in your trading plan. Starting
this afternoon, and continuing for the half day on Friday, you will have reduced
liquidity and some funny moves in many stocks. Don’t outsize yourself in
positions. The opening and contra move will probably be the best plays of the
day today, especially the expected Opening Gaps, Trap Doors and Opening
Reversals. For a daytrader, these fleecing-of-the-lambs openings are trader
music!

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
6.60	7.80	5.35

Pattern
Setups

I obviously don’t expect any
continuation entries early on, but we must be aware of those stocks that did
exhibit some buying pressure yesterday because they would be good candidates on
this “Florida” opening.Â

Possible scenarios today are the Gap
Down, Trap Doors and probably 1.5 to 2 standard-deviation-band moves, so at
least calculate the S&P 500 and NDX bands. I would keep position size
smaller, and if the contra move takes the stocks above the opening, then be
ready to reverse and go short with the opening as a pivot if the dynamics
change. This is just one of many possible scenarios, but if you outline what you
will do in each case, you will be better prepared to detach yourself from the
emotions. Stay all over the Daytrader’s Dozen today for setups.Â Right
now, I see the S&Ps have improved to -12 and the NDX futures to -46. Who
knows what comes on the opening?

Have a great trading day. Keep
your helmets on and have a wonderful holiday and Thanksgiving.

Florida Opening

BUY THE FEAR, SELL THE GREED

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