If They Can, They Will

June 20, 2000
Kevin Haggerty

Before I left for
vacation, I stated in my June
9 commentary that the tight consolidation in the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) after
two wide-range bars up and top-of-the-range closings was a sitting duck to be
run to the upside by the major players — the Generals, hedge funds and program
traders. Last week, the consolidation continued all five days, making it a
10-bar pattern. The reason I felt so strongly that the NDX 100 was ready to go
was because the consolidation was above 10-, 50- and 200-day EMAs, a
narrow-range consolidation, and the NDX had broken its downtrend line and was
consolidating above the last minor high of 3654 on May 16.Â

_{“There
is only one reason the pattern is the same, and that is obviously
because of the (over-weighted) big-cap techs… Until we see that
change, that is where the game is, and that is where you should
concentrate your short-term trade selections.”}

The stage was completely set to ignite
the move. Remember, up is the direction that makes the Generals and Wall Street
happy, and if they can, they will. Also, the NDX 100 has clearly out-performed
the S&P 500, Dow and the Nasdaq Composite. The NDX 100 is now upÂ 6.1%
since 12/31/99, the S&P 500 up +1.1%, the Nasdaq Composite -1.9% and the Dow
-8.2%. You don’t need a diagram to select the best trading stocks when you look
at this picture.Â

If you open Investor’s Business
Daily to the General Markets and Sectors page, you will see that the
mutual-fund index broke out of the exact same pattern as the NDX 100 and was
also above both the 50- and 200-day moving averages. When you check the list of
funds in the index, you will find some very aggressive growth funds in the index.
There is only one reason the pattern is the same, and that is obviously because
of the big-cap techs that they are all overweighted in. Until we see that
change, that is where the game is, and that is where you should concentrate your
short-term trade selections. From a longer-term perspective, with good risk
reward, there will be more of the JC Penney
(
JCP |
Quote |
Chart |
News |
PowerRating) and Staples
(
SPLS |
Quote |
Chart |
News |
PowerRating) to
take advantage of.Â

In that June 9 commentary, I had
framed the NDX and it gave us a .618 retracement level of 4075-4100. This run
should take us there if we get continuation. So, the next time someone asks you
what you think of the market, just tell them you don’t, and that’s because you
react to what it gives you. What you can say and understand is that both the NDX
100 and S&P 500 have broken downtrend lines and are both trading above their
10-, 50- and 200-day EMAs and you will be taking trades in the direction of this
trend until it changes.

Yesterday there were wide-range bars
and top-of-the-range closings on increased volume in almost all of the key
stocks, so you must be prepared for both continuation entry and pullback setups
on your five-minute charts. I wouldn’t be inclined to take the first
continuation entry early on this morning. I hope all of you caught some of the
large moves in the stocks from yesterdays’ commentary, especially Sycamore
Networks
(
SCMR |
Quote |
Chart |
News |
PowerRating), which closed at 115 7/8, up 15 1/2 points. Entry was 102
1/8 and the high tick from entry was 117 3/8.

Program
Trading Numbers

(September Futures)

Fair
Value

Buy

Sell

21.90

23.15

20.75

Pattern SetupsÂ Â

Have a good trading day.

If They Can, They Will

BUY THE FEAR, SELL THE GREED

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