Hit The Number

October 17, 2001
Kevin Haggerty

The
daytrader hit it on both sides yesterday. The
early rally carried the NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) up to the .618 1406 number, in
addition to the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s hitting the 35.05 .618 number. After reversal short
entries, the NDX traded down to 1368, while the QQQs hit 34.07. The numbers were
hit on the nose and the decline followed. The levels were in yesterday’s text.
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) hit 1101.66 vs.
the 1101 50-day EMA, then reversed on an outside reversal bar, trading down to
1087, which was into the closing range of the previous day.

For the second day in
succession, the rally picked up steam at around 1:00 p.m. into the close. The
SPX closed at 1097.54, which is right at the .618 retracement level and just
under the 50-day EMA of 1101. The SPX is now in a four-bar narrow-range pattern
at a key alert zone having bumped up against it four times. The early green says
they will take it through this zone with the .786 1135 level as a target.

Yesterday, NYSE volume
was average at 1.2 billion, a volume ratio of 66, and breadth of +849. The rally
off the nine-month cycle low and confluence of three minor cycles during the
Sept. 20-28 period has been excellent, certainly in the semis and other beaten
down stocks like
(
JNPR |
Quote |
Chart |
News |
PowerRating),
(
CIEN |
Quote |
Chart |
News |
PowerRating) and even a
(
CSCO |
Quote |
Chart |
News |
PowerRating). Not an analyst
in the house stepped up to the plate on the longside at these cycle period lows,
but many of the technical traders did. The analysts have to play catch-up, and I
would expect them to do so on a retracement to the Sept. 21 lows. I hope you’ve
learned to trade what is and not what should be or what you read in the
newspaper.

I must remind you that
Friday is option expiration, and most of the program action gets done prior to
Friday, which is generally a down day most of the time. October 19 is also a
minor cycle day in conjunction with a Fib pivot sequence ratio date. There are
some minor negative divergences showing up into this rally, so be very careful
on any position longs you still might have that are unprotected by options
strategies.

Looking to aggressively
short the
(
DIA |
Quote |
Chart |
News |
PowerRating)s into that 9500-9600 zone. As you know, I expect a
retracement and don’t think the "V" bottom, without a retest of it,
will stand up. We caught the cycle lows, so it only makes sense for us to wait
for a retest for another long entry.

Stocks
Today

Early green will force
gap openings, so second-entry longs above the previous day’s high will be your
focus if the rally is extended today. We will get early Trap Doors to sell, but
be quick to take profits on it on at least one-half your position, and then move
to breakeven on the balance.

Have a good trading day.

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

Five-minute chart of
Tuesday’s NYSE TICKS

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Hit The Number

BUY THE FEAR, SELL THE GREED

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