Fragile Green

April 5, 2002
Kevin Haggerty

There
were some excellent longside trades yesterday, especially
in some of the semis during the first hour and 15 minutes, but it ended there.
From 10:45 a.m., the indices went trend down for the shorts until a tradable
longside rally from 3:00 p.m. into the close. The NYSE volume increased to about
average at 1.267 billion, a volume ratio of 47, which is not what I want to see
on a rally day, and the breadth was +318.

Sector activity gave us
nothing really positive to hang our hat on. The
(
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PowerRating) reflexed up by
+1.5% after being downgraded the day before. The
(
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PowerRating) was +1.2%. I
don’t mention airlines on purpose because you rent them. Don’t buy them. I can’t
figure out their ticket logic, let alone trade them. On the red side, the
chemical iShares slid 2.4% on a Merrill Lynch downgrade. The key point they made
is that chemicals and the basics precede economic recovery, which they did, and
are now ahead of reality. The software index declined again at -3.2% under the
weight of the left hook to Microsoft
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PowerRating), etc., by Goldman Sachs. I
guess they are kind of stepping on Abby’s prediction parade of higher index
prices.

April 6 is a 1.618 Fib
ratio pivot date to be aware of, which is today and Monday straddling the
Saturday, April 6 date. Needless to say, with world events as they are and the
witch hunt for corporate irregularities, it’s not the time to be my
“unhedged hero, baby.”Â

After the price/volume
surge we saw in this rally, I thought the odds of new lows below September had
dropped from 35%-40% to about 15%-20%. One reason why I had it a 35%-40%
probability was because the last four-year cycle bottomed in 1998, and you must
allow for the possibility of a 2002 four-year cycle bottom, which would carry
below the September low. There are certainly world catalysts that could get us
there in a hurry. There are many out there with a boatload of money that would
like to see it happen because they didn’t jump in off the “V” bottom
in September, and if they did, it was well into the move. In the meantime, let’s
hope the reflex gives us a few more days of up.

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