‘M’ Day

November 1, 2001
Kevin Haggerty

A full
moon it was, as the index
traded in a big “M” with end-of-month games being played by the
institutions, especially in the semis. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) went from its
previous close of 1060 to 1075 in the first 45 minutes of trading after the gap
opening, as this was leg 1 of four primary trends. It then traded down to
1057.55 by the 12:55 p.m. bar for leg 2. From there, it traded up to 1074 on the
3:00 p.m. bar, leg 3, and the fourth leg took it right back to where it closed
the previous day at 1060 rounded off. Looking
at the travel range, it went +1.4%, -1.6%, +1.5% and -1.3%, which is a
daytrader’s dream. Of course, the empty suits reported a flat day, no change,
etc.

The NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating)
had an extreme travel range, but traded by the numbers if you took the time to
prepare for the day. It closed at 1364.78, so use the 20-day EMA of 1361.76 as a
pivot both ways today. The travel range for the NDX went +4.5% after the gap
opening to 1403 by the 10:25 a.m. bar.

The high for the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s
was 34.96 vs. its 1.5 volatility band at 34.82. And there was a reversal
wide-range bar tail on the NDX high bar. The next leg was -3.4% to a 1355 low
which was right to the .618 retracement zone using Tuesday’s 1335 low at 3:40
p.m. as your significant low. The NDX gave you an inside bar setup with a
top-of-the-range close and the third leg was in motion, which carried it +3.2%
to 1399 before the fourth leg down into the close of -2.4%. The last leg down
was initiated by a wide-range reversal bar with a bottom-of-the-range close that
reversed three previous closes and two previous lows. Total travel range was
13.5%.

Regardless of what anyone
says, this equity casino has much better odds for you than Vegas does, in spite
of the institutional and program manipulation. Net, Net, if you did your numbers
prior to yesterday, you caught the 1.5 volatility band sale and then the .618
retracement. You may or may not have taken the wide-range reversal bar for the
fourth leg down because by then you probably had motion sickness.

There were many
opportunities in various stocks that set up just like the indexes. For example,
look at your five-minute chart of
(
KLAC |
Quote |
Chart |
News |
PowerRating) and you see the same inside-bar
setup at the .618 retracement level to the previous day’s last significant low
that the NDX had. Right now the SPX is sitting in a 20-day Slim Jim between 1100
and 1050, with 1048 being the .38 retracement number to the 945 low. If it comes
out the top, there is a confluence of resistance from 1130-1135. If it comes out
the bottom, you have the .5 retracement at 1028, and the .618 at 1008, and the
.786 at 981. We don’t know whether negative war news will dominate perception
and manipulation, but you know that current fundamentals didn’t drive this rally
and never does off significant lows.Â

There is no base yet,
just a “V” bottom rally, and the 10-week and 30-week EMAs are pointing
straight down. That tells me the odds favor more of a retracement to the 945
low. We are now in the strong historical season, and it is very evident to me
that there is support for the market by the powers that be when meltdown
surfaces, and also, the institutions don’t want another year of “big
down” in the major averages.

Even after the
significant move we’ve had off the 945 low, the S&P 500 is still -20%
year-to-date, the Dow -16%, and the Nasdaq -32%. The Generals don’t make money
when all of retail is scared to death and hiding in money market funds. If they
can keep this market moving, they will, but I don’t think so until the
“V” bottom is tested. If it doesn’t happen here, it probably will from
the 1130-1135 zone. I hope for all of you this is going to be the second entry,
not the first.Â

Stocks
Today

Have a good trading day.

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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‘M’ Day

BUY THE FEAR, SELL THE GREED

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