Focus On Pivot Points: SPYs, QQQs And DIAs

September 19, 2000
Kevin Haggerty

The
S&P 500 rallied 8.5%
from its July 28 low, as evidenced by the SPYs which advanced from
141.51 to 153.59. The advance took 25 days. In the past 10 days, the SPYs have
declined 6.1%, giving up all but 1.9% of that move. The SPYs closed yesterday at
144.65, just below its 200-day EMA of 144.90 which should be used as your pivot
point either long or short today.Â

You should be ready to reverse more than once
if need be. The S&P 500 has given you good trading rallies at the .38, .50
and .618 retracement levels and now we are back to go and the 200-day EMA and,
as you have witnessed, the shorts decline much faster than stocks advance.

The QQQs closed at 89 7/8,
just below the 200-day EMA pivot point of 90.12, while the DIAs closed at 108
1/4 vs. its 200-day EMA pivot point of 108.42. You know your pivot points for
today. Watch the intraday dynamics and go with the direction, but be flexible
enough to reverse your trades. As we witnessed in July, things happen at key
inflection points.

Yesterday the fed boys
jumped in to keep you confused. One of them said he sees little risk of a U.S.
hard landing. Just maybe his vision is a bit blurred as the Generals have sold
the cyclicals down big time with Alcoa off 38%, Int’l Paper -51%, CAT -50%,
Georgia Pacific -50%, just to name a few. This recession has been partially
discounted by the institutions as they sold cyclicals, bought utilities and also
energies as a contrarian play well before crude oil took off.

The semis are all off
50%-60% except Intel which is down 27% in the past 10 days. I hope you weren’t one
of those new-high cup-and-handle buyers as Intel was pushed up for the
end-of-August markup and started south the first day in September. Intel is the
largest semiconductor of the Generals and they protected it at month end.
Of course the other semis were all
heading south at the time.

Take a look at the weekly
chart and you will see the significant negative divergence in RSI as Intel was
marked up month end. That was a major red alert. Remember, it is the dynamics
that bring life to the pattern. If you daytrade the breakout, that’s one thing,
but it’s fool’s gold to position trade them with such negative
divergences.

The other fed governor
stated that there is no new economy and was questioning whether technology will
continue to improve the way things are done at the same rate. If you haven’t
noticed, the media has dropped most of the new/old rhetoric that you listen to
every single morning when you turned on the TV financial news. Thank goodness!

The brokerage stocks found
the airpockets yesterday as deal fever subsided for a day. Merrill, Goldman and
Morgan Stanley had all reached a point 35%-40% above their 200-day EMAs, which
is a very high risk zone in the trading tree. Lehman and Bear Stearns commanded
more of a deal premium with Lehman hitting 65% above and Bear Stearns 52% above.Â

Chase Manhattan Bank is leaning on the bottom of a lengthy trading range that
began in April, 1999, and the two significant lows in that range are 43 7/8 and
44 1/8. The stock closed at 46 9/16. Each time CMB announces a deal, the stock
heads south.

Nevertheless, these
bottom-of-the-range trades can be a good risk/reward because you would bail out
below 43 7/8.

Today will be an easier
read for you because of the pivot points so it doesn’t matter whether the
Generals sell them or buy them, you should just hitch a ride. From a position
standpoint, anything south below the 200-day EMAs will present opportunities to
scale into position trades in the SPYs, QQQs or just maybe the DIAs for a
year-end rush that will happen.

The cyclicals like DD
and Int’l Paper bear watching to detect any entrance by the Generals. DD and
Int’l Paper are both setting up as RSTs looking for a close above the high of the low
day. Defined risk strategies would be best, such as buy stock buy put or buy a
call and certainly look at the LEAPs. You could also do some different spreads
with a defined risk. Continue your education on options if you want to position
trade for a longer time period. You will sleep better and be infinitely more
successful. You don’t have the
capital to play the game like the mutual funds or hedge funds, but you can play
and stay in the game using options.

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
21.25	22.60	20.05

Pattern
Setups

Also focus on the QQQs, SPYs and DIAs
around their pivot points.

Have a good trading day.

src=”https://tradingmarkets.com/media/images/comms/haggerty/kh091900-01.gif” width=”454″ height=”295″>

src=”https://tradingmarkets.com/media/images/comms/haggerty/kh091900-02.gif” width=”453″ height=”295″>

Focus On Pivot Points: SPYs, QQQs And DIAs

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources