Get Ready To Go

March 22, 2004
Kevin Haggerty

What Friday’s Action Tells
You

Also very extended is the XBD which ran +135%
to
746 vs. a 745 3.14 Fib extension of the AB leg. It has only retraced -8.3%
as of
Friday, and certainly has more to go. This weekly chart, along with the QQQ,
CYC
and IWM are included in today’s commentary. The QQQs also got out to the
3.14
extension zone, gaining 97%, as did the CYC, +93%, and also at the 3.14
zone.
These extensions coincided with the 1150 – 1161 SPX sequence zone. The QQQs
have
retraced -11.2% and the CYC -8.7% so far from these highs. Small caps, as
evidenced by the IWM (Russell 2000 iShare), have had a big run at +85% to a
120
high, right between the 3.14 and 4.236 zones. As you can see on the chart,
it
has only retraced -6.7%.

The SPX is playing catch-up and is only -5.2%
high-to-low and just -4.1% close-to-close. It’s got to give back more than
that,
in my opinion. An air pocket or two this week would be best for traders
because
it could precede an end-of-quarter reflex good for a few days. The SPX
closed
the year 2003 at 1111.92 and went out at 1109.78 on Friday, so this year is
a
push so far and frustrating for many money managers, but maybe they will try
to
make the quarter green to keep the string alive, unless they have to come
from
too far down.

NYSE volume on Friday was 1.44 billion shares,
with the volume ratio at 24, and breadth -752. The damage was done by the sell
programs in the last hour. From 9:30 a.m. to 3:00 p.m. ET, there was nothing
really happening to either the supply or demand side. The SPX ranged out all
day between 1122.72 – 1116.88 before the expiration spike down of almost 10
points in the last hour.

size=2>Â	Monday 3/15	Tuesday 3/16	Wednesday 3/17	Thursday 3/18	Friday 3/19	Net
color=#0000ff>Index	Â	Â	Â	Â	Â	Â
color=#0000ff>SPX	Â	Â	Â	Â	Â	Â
color=#0000ff>High	1120.57	1113.82	1125.76	1125.50	1122.72	1125.76
color=#0000ff>Low	1103.36	1102.61	1110.70	1113.25	1109.69	1102.61
color=#0000ff>Close	1104.43	1110.70	1123.78	1122.31	1109.74	1109.74
color=#0000ff>%	-1.4	+0.6	+1.2	-0.1	-1.1	-0.8
color=#0000ff>Range	17.1	11.2	15.1	12.2	13	23.1
color=#0000ff>% Range	6	72	87	74	0	31
color=#0000ff>INDU	10103	10185	10300	10296	10187	Â
color=#0000ff>%	-1.3	+0.8	+1.1	-.04	-1.1	-0.9
color=#0000ff>Nasdaq	1939	1943	1977	1962	1940	Â
color=#0000ff>%	-2.3	+0.2	+1.7	-0.7	-1.1	-2.2
color=#0000ff>QQQ	34.90	34.95	35.52	35.33	34.73	Â
color=#0000ff>%	-1.7	+0.2	+1.6	-0.5	-1.7	-1.6
color=#0000ff>NYSE	Â	Â	Â	Â	Â	Â
color=#0000ff>T. VOL	1.53	1.41	1.50	1.36	1.44	1.45
color=#0000ff>U. VOL	168	913	1.20	578	340	640
color=#0000ff>D. VOL	1.35	478	251	760	1.07	782
color=#0000ff>VR	11	66	83	43	24	Â
color=#0000ff>4 MA	31	44	62	51	54	Â
color=#0000ff>5 RSI	25	34	50	48	26	Â
color=#0000ff>ADV	850	1933	2553	1462	1250	1610
color=#0000ff>DEC	2440	1360	784	1824	2002	1682
color=#0000ff>A-D	-1590	+573	+1769	-362	-752	-362
color=#0000ff>4 MA	-806	-256	+579	+98	+307	Â
color=#0000ff>SECTORS	Â	Â	Â	Â	Â	Â
color=#0000ff>SMH	-2.6	+1.1	+1.6	-1.4	-3.6	-4.9
color=#0000ff>BKX	-1.0	+1.2	+1.2	-.09	-1.4	-.09
color=#0000ff>XBD	-2.4	+0.4	+2.1	-0.7	-1.4	-2.0
color=#0000ff>RTH	-1.4	+0.2	+1.3	+0.5	-0.8	-0.2
color=#0000ff>CYC	-1.9	+1.0	+2.0	-0.3	-0.9	-0.1
color=#0000ff>PPH	-1.0	+1.3	-0.7	-0.1	-1.7	-2.2
color=#0000ff>OIH	+0.7	-1.0	+3.2	+0.8	-2.5	+1.2
color=#0000ff>BBH	-2.5	-0.8	+2.6	-0.2	-0.7	-1.6
color=#0000ff>TLT	+0.1	+0.8	-0.2	-0.5	-0.2	0
color=#0000ff>XAU	-2.3	+1.2	+1.6	+2.1	+0.3	+2.9

Table
Legend

^next^

Today’s Action

It wasn’t a very trader friendly day on Friday
in the major indices, so maybe we can pick up the slack this week with an oversold
reflex in some technology stocks or proxies like the QQQs, which have declined
for eight weeks now from 01/21 39 high. The SMH hit a 45.78 high on 01/12 to
lead technology down, with the XLK hitting its top 01/20, as it has a strong
correlation with the QQQs.

Eight weeks down into the 40-week EMA zone
for
both the QQQ and XLK and nine weeks so far for the SMH, which closed below
its
40-week EMA of 38.20 on Friday at 37.63. The SMH volume on Friday was the
lowest
down volume of the past six days since the decline from 41.68 nine days
ago.

The early futures are the kind of red
professionals like to see, if it holds through the 9:30 a.m. opening. The
S&P
futures are -8.50, the Dow-81, and the Nasdaq -17. It is certainly good for
this
corner’s synthetic straddle put on into the 1150 – 1161 sequence zone of
confluence, in addition to replacing long index proxies with LEAP calls and
writing out-of-the-money near-term options against the LEAPs. The expansion
of
IVolatility in the SPX, QQQs, etc., has certainly been very beneficial to
the
long synthetic straddle.

The 1.0 volatility band in the SPX today is
1100.33, down -9.47 points vs. just 7 to 7.5 points for the 1.0 volatility
band
just two weeks ago. The other SPX volatility bands for today, based on
Friday’s
1109.80 close and AIV of .16295 are 1.28 — 1097.68, 1.50 — 1095.60, 2.0 —
1090.87, and if the world ends, the 3.0 is 1081.40. For the QQQs, which
closed
at 34.75, the 1.0 band is 34.30, the 1.28 is 34.17, the 1.50 is 34.07, the
2.0
at 33.85 and the 3.0 at 33.39. There is a monthly S3 pivot level at
33.59.

Put your volatility band hat on, along with
the
Trap Doors and Gap Pullbacks and get ready to go.

Have a good trading day,

Kevin Haggerty