Game Day

June 1, 2001
Kevin Haggerty

Some of the techs that have
been trashed the most recently had the best reflex bounces. The index opened at
1785 which proved to be the day’s low and traded up to the intraday high of 1838
by the 1:35 p.m. bar. During the rally since April, the last hour of movement
has been very positive on balance.Â

I never get comfortable
when you uptrend all day and then fade into the close during the last hour. My
expectation is for the SPX and NDX, along with the Dow, to make Fib retracements
of some sort before any further significant advances. Hopefully, yesterday’s
kiss carries over for a few days. As you have heard me say since Tradehard.com
started, opinions are just that until they can be quantified. I may think it has
to give us a retracement from here, but that can’t be quantified until we get
lower lows.Â

When I see rising tops and
rising bottoms as we currently have in the indexes, we are still up. The upturn
to down for the NDX is when the index takes out and closes below 1768.62,
followed by a break below 1743.45, which is the bottom of the recent 23-day
trading range and also below all of its EMAs.

The SPX closed at 1255.82,
just above its 50-day EMA of 1249.21 which can be used as an early inflection
point. Lower bottoms don’t appear until below 1232. Save yesterday’s text which
frames the Fib retracement levels — they are just numbers and levels where you
should focus on possible reversal-pattern entries which must indicate a Change
in Direction before you get on board.

The game is identifying
buying/selling pressure and then taking continuation or reversal trades. The art
is recognizing the dynamics surrounding the patterns which are just numbers and
lines. That’s why I say to follow the Generals. The advanced game is taking
high-probability resistance or support levels and putting on defined-risk
options strategies, thus getting you in at potentially more profitable levels.

An example of this is the
1305-1310 resistance zone for the SPX which we were focusing on well in advance,
and then saw the negative divergences as the index reached this zone. Everyone
has a different style and risk profile but most don’t have unlimited funds to
play an unhedged position game, so get in the advanced group and get an options
education.

Stocks
Today

(June
Futures)

Fair Value

Buy

Sell

1.55

Â 2.65Â

Â 0.25

It’s the first Friday of
the month, so we get the May unemployment game this morning, not to be remembered
next week. Because of the inevitable overreaction and media hype, it puts
traders in an intraday reactionary mode and that means opportunity.Â

Have a good trading day and a better weekend.

Five-minute chart of yesterday’s S&P 500 (SPX) with 8-,
20-, 60-
and 260-EMAs

Five-minute chart of yesterday’s NYSE Ticks

Game Day

BUY THE FEAR, SELL THE GREED

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