Key Market Sets Record

September 6, 2001
Marc Dupee

Readers of this column will remember that I pointed
out a head-and-shoulders top pattern that had developed in both markets back
in June and that traditional measured move analysis suggested we could
undercut the spring lows (for more on this topic, see my article in the
Futures-Indicators-Patterns section titled Defining
Reward/Risk Ratios With Chart Setups). While we still haven’t reached
the downside objective of twice the distance from the head to the neckline,
we could likely see a reaction off the new low close, especially since we
closed into important support and at a psychologically important round
number (in the S&Ps).

Stock index futures got hammered on a barrage of
bearish sentiment, kicked off by the National Association of Purchasing
Manager’s non-manufacturing report. The report came in at a four-year low,
the lowest since the statistic has been tracked, and all but undid hopes
that last week’s NAPM manufacturing report signaled an economic bottoming.
Bearishness in front of corporate pre-announcement season also inspired
selling.

The session had lots of volatility thanks to
Microsoft news early on, but pit traders employed bread-and-butter tactics
that you too can employ: they sell the highs and buy the lows. Look at this
morning’s plunge, and you will see that the 10:00 a.m. ET low was made 1.50
points below Wednesday’s low. A “failure” is when the market
exceeds the previous low by more than 1.70 points. The market then raced
back to the morning highs, and voila, at 1227.50, 1.50 handles above the
9:50 a.m. ET high, the high was made. Again, this was a “failure” to break
out by more than 1.70. You’ll see a similar situation in the 1150.50
area with an intraday double-top formation and a failure to break out above
that area.

The spooz closed down 30.00 at 1103.50, which is into
an important support area. Nasdaq futures sank 56.50 to 1362.50, and Dow
futures lost 225.0 to 9820.0.

Traders fleeing the move to new lows scooped up the perceived
safety of debt instruments, driving the 10-year notes
(
TYU1 |
Quote |
Chart |
News |
PowerRating) and
T-bonds
(
USU1 |
Quote |
Chart |
News |
PowerRating) to make good on Pullback From Highs
daily setups and for the 10s to erase all of the big loss the suffered on
the NAPM “manufacturing bottoming” selloff. Players are pricing
in higher odds that the Fed will trim rates an additional quarter-point in
October.

Also from the
New 10-Day Low List, the Japanese yen
(
JYU1 |
Quote |
Chart |
News |
PowerRating) continued sinking
below its 38.2% retracement and looks destined to test its 50% line in the
.8220 area.

Key Market Sets Record

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources