Look For Gap Up Opening
I hope everyone has recovered from yesterday. That’s the good thing about trading–you start every day with a fresh slate.
Tuesday was a search and destroy mission, with the S&P futures, S&P cash and the OEX taking out Monday’s lows in the first hour of trading. The market then proceeded to rally 1.4% (to a high of 132.25 in the SPDRS). The volume wasn’t very strong on the rally, but most of the major sector indexes were green, and it was a welcome relief from Monday’s death march. But when institutions aren’t present in the market (like yesterday), the futures and the upstairs program trading units of the major brokerages have a strong influence on the S&P market action.
Ultimately the SPDRS couldn’t stand the heights at 132.28 after failing to trade above their 50-day moving average. They sold off to new intra-day lows of 128.50 (a significant drop of 2.9%) on big volume in the last hour for a combined swing move of 4.3% on the day–that’s volatility.
With yesterday’s washout, there are few good setups. Around 8:30 a.m. ET, the S&P futures are up over 7 points, and the four NASDAQ generals–Dell, Microsoft, Cisco, and Intel–are all up, which points to a gap opening. Look for the first breakouts of consolidations to new highs if the institutions follow through. Wait for the pullback after the gap opening to see what happens. I would think that some buyers would come in to defend some of the stocks that have dropped 25-30%, like Microsoft and EMC.
Target Stocks Of The Day  Some of the stocks that are setting up (although not too strongly) are: Gannett [GCI>GCI], Sonat [SNT>SNT], Colgate-Palmolive [CL>CL], FDX Corp. [FDX>FDX], Alcan Aluminum [AL>AL], and Proctor & Gamble [PG>PG].
Program trading numbers  Buy: 5.40. Sell: 1.72.
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.