Looks Like A 2.0 Volatility Band Day

April 8, 2002
Kevin Haggerty

The
SPX
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PowerRating) and DJX gapped up and
hit intraday highs by the 9:45 a.m. bar as the institutions then came in after
the typical economic report BS. The NDX
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9:40 a.m. bar as it hit its intraday high of 1413, then went south to 1377 by
noon. It had a brief oversold kick up, but closed on the lows at 1376.72, -1.5%
on the day. The SPX was -0.3% and the Dow +0.4%. For three straight days it’s
been early up and then a ski slope down for the NDX. It has been down to this
1380-1376 level four times, so it should get resolved quickly.

The techs had an ugly
start to April with various tech indexes down 5% to 7%. The
(
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for the first week. Techs certainly haven’t started on a path to fulfill the up
seasonality bias. The NDX and XLKs are mirror images of each other — in a
downtrend since Dec. 5 and below all of their moving averages. The
(
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PowerRating) has fared much better, hitting its high March 8 and has now
pulled back in a flag pattern to its 50-day EMA at 572.15. The SOX closed at
572.62. The 200-day EMA is 564.91; the 200 SMA is 539.49. Be aware of both. The
(
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PowerRating) has pulled back for three days after hitting its rally high on
April 2. The
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PowerRating)s are ugly, closing at 111.51 and look like they want to
challenge the September low of 103.98 or last March’s 92.51 low. Daytrade the
group, but don’t take them home.Â

Friday was another light
relative volume day, with NYSE volume at 1.1 billion and the Nasdaq at 1.5
billion, which is about 15% below its average. The volume ratio for the Nasdaq
was just 28 as techs slid, and a little better for the NYSE at 47, in addition
to positive breadth at +599.

It’s been very difficult
for money managers to make money for the past three months, and the sideways
trading action in the SPX since Dec. 5 tells you why. Long term is after lunch, as nothing
carries through for more than a day or so. That range will be resolved sooner
rather than later. Until it gets resolved, continue to play the overreactions to
all of the minute economic chatter/earnings season hype. They all get overdone,
and we have been able to catch the contra reflex moves opposite the initial hype
artificial move. Those of you that are attending the May
seminar will become students of sequence trading, and thus, much more
comfortable with that kind of extremely effective trading.Â

As I look at the screen,
I see the early red, with the S&P futures -7, the Nasdaq futures -18, and
the Dow -65, so it looks like our first trade will be on the longside after the
emotional early ride.Â

Stocks
Today

There was certainly no
buying pressure on Friday, so no real long setups on the daily charts. I will
look to the semis mentioned
Friday for Trap Door and volatility band setups, in addition to the index
proxies.

On the shortside, the
proxies are much easier to read and trade, especially during this critical
earnings season, in addition to the current world situation. I will just print
out my volatility band screen and look to the extended volatility band stock
setups on the intraday charts. Let the emotion make the first move, and then we
play the reflex. It’s much easier and better on your pocketbook.Â Â

Have a good trading day.