Keep Eye On Techs, Drugs

• October 20, 1999
• Kevin Haggerty

Keep Eye On Techs, Drugs By 11:00 AM ET yesterday, we were up 22 points on the S&P futures and up 211 points on the Dow. What an astute investor it was who took the S&P futures up 25 handles in the last hour on Monday in front of the CPI report Tuesday morning. Nice trade, Turk.

The visibility of the earnings in drugs always makes portfolio managers feel comfortable

Other than the semiconductor index (SOX), most of the major sectors were green all day, led by the drugs, Internets, and banks, for the second day in a row. The drug stocks are obviously a safe haven for many of the tech surprises we’ve been seeing to the downside; the visibility of the earnings in drugs always makes portfolio managers feel confortable, so you get that move in this area. This probably will continue.

The problem yesterday, from a trading standpoint, was the gap opening without much pullback. The market went sideways as Mr. G. was speaking, and then headed south to new intra-day lows before closing in the lower end of the range of the S&P 500. The day was not much of a confidence builder, as most of the major techs, such as INTC, DELL, MSFT and TXN, all finished on the down side.

We are at levels where you should be ready for some reflex rallies to the upside in most of these major techs. This morning, with Microsoft (up over 5 points in early trading) and EMC reporting good earnings, we should open up strong this morning. The S&P futures are up over 6 points and DELL, INTC and CSCO all up more than a point.

Target Stocks Of The Day As I mentioned, the drugs are attracting some of the money from the panic shots in the techs. They consider this a safe play, but I think it’s more than that because many analysts have been banging the drums for the drugs. Continue to trade Merck [MRK>MRK], Warner-Lambert [WLA>WLA] and Pfizer [PFE>PFE] on any continuation moves on the five-minute chart.

The institutional Internets–America Online [AOL>AOL], CMGI [CMGI>CMGI] and Yahoo [YHOO>YHOO]–all look good, especially CMGI trading above 99 3/4; that should really move.

Program Trading Numbers
Buy	Sell	Fair Value
10.50	7.30	8.85

Also watch Immunex [IMNX>IMNX], DoubleClick [DCLK>DCLK], General Motors CL ‘H’ [GMH>GMH], Sun Microsystems [SUNW>SUNW] and Wal Mart [WMT>WMT], which tried to get going yesterday above the 52 1/2 level, pulled back to that high, and then closed at 52 11/16; they should probably get that going today.

If we turn and swing to the short side, because of the volatility, I recommend staying with the SPDRs [SPY>SPY], QQQs [QQQ>QQQ] and Diamonds [DIA>DIA].

If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his series of tutorial articles.