Get Ready For Volatility
Friday’s volume was the lowest this year in advance of the widely anticipated Tuesday-Wednesday FOMC meeting. The Dow and S&P 500 finished down over 2% each last week, but because of some early tech leadership, the NASDAQ lost only .4%
The QQQs traded as low as 108 3/8 after breaking the 110 low, but still managed to close above their 50-day exponential moving average (EMA), unlike the Dow and S&P. The basics and energies were the big losers last week, certainly adding to the downside in the Dow and S&P.
The S&P can be played from the long side crossing its 50-day EMA of 1318.71 (it closed at 1315.30); the stop would be below Friday’s inside day low of 1312.59. If the reaction to the FOMC takes us south, play it from the short side trading below this level and again below Thursday’s low of 1308.50. The SPDRs or a strong stock are the vehicles to trade on the upside.
As I look at the screen around 8:25 AM ET, the futures are up a couple of points, and there are numbers like consumer spending coming out, which people are overly focused on before the Fed meeting; we could have a volatile two or three days.
Target Stocks Of The Day  The techs did the best last week, and the high-relative strength, high-alpha stocks continue to make the most explosive moves, so that’s where we’ll look for patterns. Some of these stocks are familiar names that set up again on Friday, including Texas Instruments [TXN>TXN], Network Appliance [NTAP>NTAP], Cisco [CSCO>CSCO], Novell [NOVL>NOVL], which is threatening to push out of a cup-and-handle pattern at its highs, Uniphase [UNPH>UNPH], Electronics for Imaging [EFII>EFII], Citrix Systems [CTXS>CTXS], Check Point Software [CHKP>CHKP], Abercrombie & Fitch [ANF>ANF], Bank of America [BAC>BAC] and Alcoa [AA>AA].
| Program Trading Numbers | ||
| Buy | Sell | Fair Value |
| 13.10 | 9.75 | 11.80 |
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.