Get On The Volatility Bandwagon!

October 13, 2000
Kevin Haggerty

Another
brand name lost half its value.
Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) is down from 70 on April 12 to an intraday low yesterday of
34.68. It closed at 48 7/8 on Thursday, warned, and opened at 37 1/4 today,
finally closing at 35 1/8. Down 25% on a brand-name warning seems to be the
norm. Take the stock as low as possible as fast as possible, and try to clear
the decks.

As I am on my way to the
TradingMarkets 2000 seminar early on Friday morning, I am working off
consolidated numbers, but it wouldn’t make a difference on the kind of day we
had today. Another big New York
Stock Exchange volume day with just under 1.4 billion shares trading, with 1
billion shares down and just 335 million up for a volume ratio of 25. Decliners
led advancers by about 1500.

The Nasdaq Composite had a
negative-volume to positive-volume of 2.6 to 1, while the S&P 500 was 2 to
1. So we saw no improvement there as price continued down, with the NDX -3.1%
and the S&P 500 dropping 2.6%. The one thing about this bear-market decline
for the NDX 100 is that it is consistent after breaking below a consolidation at
the 200-day EMA and that we have yet to get a one-day change in direction with a
close above the high of the previous day for the past 10 days.

Those of you who have taken
the time to understand the volatility bands and traded the second
standard-deviation band the past two days in the S&P 500 and some of the
other big-cap caps, have done extremely well. There was a 37 point rally from
the second standard-deviation band on Wednesday and a 23 3/4 point move from the
same band yesterday, as well as two additional 10-point moves at the
retracements back to that band. Review my lesson on Volatility
Bands. You will
be rewarded.

Friday will be another reaction day
from the intraday charts, simply because continuation moves above or below the
previous day’s high or low can happen early on when all we are getting is 3%-4%
gaps up or down on the open. It’s
a volatility bandwagon, so get on it!

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
14.00	15.40	12.75

Pattern
Setups

(
JNPR |
Quote |
Chart |
News |
PowerRating) is 207 bid in the
aftermarket as I look, based on earnings, so barring more Middle East in the
morning, and a Friday the 13th full moon, maybe there will be a good reflex
rally to end this miserable week.

It seems like the chosen ones have
more to give up on the downside and any rally will meet some early selling by
some of the portfolio managers that are knee-deep in these extreme-valuation
stocks and have under-performed. I
would prefer to see more of a capitulation by these stocks and that would set
the table for a very sharp bear-market rally over the next three to four
months.

Have a good trading day and I look
forward to seeing all of you who are going to be in Vegas for the seminar and
get a chance to talk with you.

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Get On The Volatility Bandwagon!

BUY THE FEAR, SELL THE GREED

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