Let The Semis Be Your Guide

June 18, 2001
Kevin Haggerty

Last
week was a complete menu which
was topped off by Triple Witch expiration. The second-quarter earnings
comparisons have long been expected to be extremely weak, but yet the reality of
it and the hype surrounding it still brings on weakness, as we are seeing. In
addition, the programs will usually accelerate the market in the direction it’s
going and last week, that was down as the retracement of the April lows was in
full force.

There was the inevitable
downward revision by the Bureau of Labor Statistics (what a surprise) of the
numbers indicating how slow the economy is — which has started the tongues
wagging about and expecting more than a 1/4 point reduction by the Fed. I think
I’ve seen this play before, but that’s the hype that keeps the volatility in
play.

The fact is that Telecom
and Networkers don’t run the economy. Going forward, as the correction continues
and you are deciding to commit longer-term money, then you should be glued to
the Semiconductor sector for signs that things are really turning up and is no
longer perception alone. If the Semis are picking up, that is because other
Technology sectors are starting to turn. Chips
are where it’s at. A couple of
Semis have made positive comments with the most recent being
(
MCHP |
Quote |
Chart |
News |
PowerRating) on
Friday (which indicated that a bottom is forming, based on their backlog and
inventory data).Â

On Friday, the S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) traded down to the 1203 intraday low, which is right
at the .50 retracement of the 1081 low and previous gap. That alert level gave
you the best trade of the day as the
(
SPX |
Quote |
Chart |
News |
PowerRating)Â ran to 1221 by the 11:20
a.m. bar, then went sideways for the remainder of the session, closing at
1214.36. The entry was a 1,2,3 close above 1205 which was good for 16 points in
just 12 bars.

The Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
which had gapped down on the opening to an intraday low of 1656, ran to 1726
after giving you entry. From here, you should be alert for the rally to take the
SPX back up to a box of resistance at the 1250-1260 levels. You have the 1246 #2
swingpoint low, the head-and-shoulder neck at about 1250, the 50-day EMA at
1249, the 20-day EMA at 1251, and the 100-day EMA at 1260, which is also the
down trendline from the recent 1316 high.Â

I would say that is enough
convergence for you to anticipate another short opportunity to play a deeper
retracement of the April lows before we get a more sustained rally.

Stocks
Today

(September
Futures)

Fair Value

Buy

Sell

9.05

Â 10.15 Â

Â 7.85Â Â

Have a good trading day.

Friday’sÂ SPX five-minute chart

Friday’s NYSE
TICK five-minute chart

Let The Semis Be Your Guide

BUY THE FEAR, SELL THE GREED

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