Large Players, Small Entrance

October 4, 2001
Kevin Haggerty

It was a tech
explosion with all of the stocks purged by
the institutions at quarter’s end leading the charge. Shorts were scrambling as institutions were
repurchasing stocks they had sold so as not to be seen with the bad guys at
quarter’s end. It also appeared to be more than that as several of the largest
institutions probably utilized the current extremely oversold condition as an
asset. Yes, institutions make premeditated attacks on short-squeeze candidates,
and the techs certainly fall into that category, with at least 55 NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) stocks recently trading as teenagers.

The NDX 100 advanced
7.8%; the Nasdaq 5.9%. The Dow and S&P 500
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) ran 1.9% and
2.0%, respectively, which is good, but not the same as the Sept. 24 explosion
which came at the nine-month cycle date along with a Fib pivot date on 9/21. As
we have mentioned in previous texts, four cycles come together during the 9/28
to 10/5 period, in addition to the quarter’s end and reinvestment of new money
starting the fourth quarter. Regardless of the war zone, and on top of some
stimulus rhetoric by the government yesterday, I guess the institutions thought
the time was right.

As to be expected, the
defensive stocks fell off, such as foods, drugs and gold. The SPX closed at
1072.28, almost back to the Sept. 10 1093 close. The NDX closed at 1365 on 9/10
and went out 1249.41 yesterday. An example of how the semis led the down is the
(
SMH |
Quote |
Chart |
News |
PowerRating)s closed at 39.57 on Sept. 10 and went out at 30.90 yesterday on the
biggest one-day volume in two years. So, there is certainly room there if the
Generals have really made a decision. The SMHs, as I have mentioned in previous
text, must clear 32.45 to get above what is now a nine-bar consolidation; the
20-day EMA is 33.51.

Yesterday, the SPX in a
spiraling move paused at the 20-day EMA of 1055 for 10 bars, then broke out of
that consolidation to new intraday highs, running to the 1066.50 Fib
retracement, where it declined from 1066 to 1059. From there, the final leg up
took it to 1075, closing at 1072. The next alert level for the SPX is the 1094
.618 retracement zone and the 50-day EMA at 1110. For the NDX 100, the QQQs have
the .38 retracement to the 39.90 high at 32.05, then a .24 retracement to the
51.95 high of May 22 at 33.04, along with the .50 retracement to the 39.90 high
at 33.55. Yes, there will be a pullback and unknown war volatility is right
around the corner. Don’t get carried away with yesterday, and use an options
strategy for any long positions other than a daytrade.

Stocks
Today

When there is more going
on, it is better to concentrate on less and avoid trading spontaneously.Â

Have a good trading day.
Hope to see you all in Vegas at the seminar.

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

Five-minute chart of
Wednesday’s NYSE TICKS

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Large Players, Small Entrance

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