If The Generals Play Mark-Up, Here Are Some Names To Watch

June 27, 2003
Kevin Haggerty

What Thursday’s Market Action Tells You

We
got the better upside trade yesterday, as both the SPX
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PowerRating) took out Wednesday’s lows of 974.86 and 9000.68, then reversed
them to the upside for a trend up day. The SPX intraday low yesterday was just
973.80, while the Dow low was 8987.16. Net net, the “no reason”
decline on the Fed rate cut provided minimal carryover weakness, but enough for
traders to enter a trend up day at the lowest common denominator. That was our
trading plan yesterday, wasn’t it? (See June 26 commentary.)

On the day, the SPX was +1.1%, closing at 985.80
and above the 20-day EMA at 981.75, which is now the first downside pivot to be
aware of. The QQQs closed at 30.20, +2.3%, and above the 20-day EMA of 29.93.
NYSE volume was on the lighter side at 1.2 billion, but was enough to keep the
ball rolling into the end of the second quarter. That should not surprise you,
and the trading plan reflected that probability. All of the other major sectors
finished green, except for the OIH, which was -1.8%.

Most of the momentum stocks from the scrolling
list had excellent moves yesterday, and many different intraday entries. There
are three more trading days until quarter’s end, and the last day could be just
a neutral to quiet day because the regulators frown on any unusual marking up of
stocks on that last trading day.

Today’s Plan Of Attack

The momentum stocks are well above the lines
after big moves, and they might push them up a bit more these last few days.
Most of the momentum stocks are on the recent scrolling list not because of
their so-called fundamentals, but because they are being “gamed” well
beyond their current worth and have been pushed higher as the quarter comes to
an end. Many of these stocks are already up as three- or four-baggers since the
October lows. Who’s kidding who? And many of the empty suits are debating
whether or not this is a bull market. Don’t tell that to the gang that has been
riding on MERQ, for instance, from 15 to 44, or USAI from 15 to 40, etc., and
many others like it. It’s about the moves and where the game is being played,
not just whether or not an
(
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(
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are in motion depicting an economic recovery. Perception makes the market
move.Â

In addition to regular institutional buyers, you
have the hedge funds running them up, fronting the institutions. Then you have
those players who know the current fundamentals aren’t even close to the prices
these stocks are trading at, so they jump on the short side, and that fuels
higher prices if the buyers remain dominant. The result is a spiral up as we
have seen since the October and March lows. Many of these very same stocks can
easily become short setups if the market cycles down after the first few days of
July through August. They all have big air pockets below current prices, and it
could get crowded at the exits trying to cash in some of the funny money profits
that these stocks have built in to current prices.Â

Have a good trading day.

Kevin Haggerty

If The Generals Play Mark-Up, Here Are Some Names To Watch

BUY THE FEAR, SELL THE GREED

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