Good Things Happen In Good Zones

May 9, 2002
Kevin Haggerty

The SMHs are up 15%
low-to-high in two days from a 36.45 low on Tuesday vs. the 36.05 .618
retracement up to a 42.04 high yesterday, closing at 41.70. The 200-day SMA is
42.35, the 50-day EMA is 43.38, and that is also the .618 retracement to the
last swing point high of 48.10. Believe me. The SMHs will breathe and pull back
some.

NYSE volume jumped to 1.5
billion shares, which is 20% above its average, with a volume ratio of 82. There
was 1.2 billion up, and that is the average total NYSE daily volume for the past
several months. Breadth was +820. The bigger moonshot, which gave some
pre-warning on Tuesday with its up-volume number was the Nasdaq. It traded more
than 30% above its average volume at 2.4 billion shares, volume ratio of 85, and
breadth at +1360. The up volume of 2.010 billion was just under the total up
volume for the past four days combined and once again, more than the total of
the last three days combined. It
is also significant that 54 NDX 100 stocks had gains of 10% or more yesterday,
25 greater than 15%, and 12 stocks greater than 20%. With that kind of a move,
and I could care less about the "after the fact" reason, we still have
to execute a new trading plan today, starting from scratch.

On many of the stocks
that had big gap-up days, like QLGC and KLAC, I am certainly not interested in
any continuation long entries today. If they pull back during the day and set up
on the long side, then it might be a different story. If the Generals are going
to push the move, there will be daily chart pullback entries in many of these
gapped up stocks, which will provide good trade setups before this move is over.
If some of the extended stocks open above yesterday’s high, then reverse, you
will probably get some decent shortside scalps this morning.

The most bullish scenario
for me this morning would be for some early red with a positive volume ratio.
This would set up some good pullback trades. If we rally above yesterday’s
highs, and I don’t mean the first couple of five-minute bars, then watch the
up-volume/down-volume ratio closely for confirmation. Rising prices on a
less-than-robust volume ratio means profit-taking is imminent and look for
intraday shorts.

Stocks
Today

Have a good trading day.

Five-minute chart of
Wednesday’s SPX with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Wednesday’s NYSE TICKS

Good Things Happen In Good Zones

BUY THE FEAR, SELL THE GREED

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