Money Off The Table

• March 6, 2002
• Kevin Haggerty

The
Dow
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$INDU |
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what it had gained the previous two days, declining 1.4%, as the extended basics
turned red. The NDX
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$NDX.X |
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(
$SPX.X |
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continued to slide, with the
(
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50-day EMA, and in some cases 200-day EMA, you will lay in wait for — and if
— the Generals decide run them again.

The
(
$SOX.X |
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well in light of the 17% gain in two days and gained another 2.2%. Don’t play in
the semis on breakouts, just pullbacks. The brokers had another green day, with
the
(
$XBD.X |
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(
$BTK.X |
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stocks, basics and drugs all close red, with the semis and brokers green and the
banks and energies mixed. The housing stocks and related mentioned as extremely
extended got whacked yesterday as the Generals took money off the table. Of
course, the TV media and their guests were pounding the table right at the recent top,
probably sucking in many retail buyers at exactly the wrong entry point.

NYSE volume was again
heavy at 1.539 billion, or 23% above average. The volume ratio was 44, which is
good on a day the Dow gave back 153 points. Breadth was dead even at +5. The
Nasdaq volume dropped slightly to 2.1 billion, but the volume ratio was still
very positive at 66, and the NDX 100 had a volume ratio of 74, so nothing bad
happened there. On the day, the markets performed quite well relative to recent
large gains. Money was taken off the table in basics, retail and housing, as it
should be. Cutting back on basics was very good to our spread of long
(
XLK |
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and short
(
XLB |
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Going forward, I strongly
prefer tech over smokestack stocks. Basics run early, and portfolio managers
only expect certain returns from smokestack stocks before they cut back
substantially. Sooner or later, as always, tech will run to overextended
extremes in a bull market and PMs are forced by rising prices to join the game,
or in some cases of the larger funds — names to be excluded — they initiate
and accelerate the move. 

After the spree of short
covering, along with real buying by the Generals putting new money to work, the
Nasdaq/NDX are very short-term overbought, and there are now air pockets right
below. I am certain you won’t be, or shouldn’t be, surprised at any flash moves
down similar to yesterday’s Dow decline. Suffice to say, anxiety has switched to
fear of not being in rather than fear of decline. The jury’s still out on that
one.

Stocks
Today

Yesterday’s reversal bar
with a bottom-of-the-range close for the SPX was right at the 200-day EMA, which
is now 1157.34. It is also the square of nine and cardinal numbers level.
Needless to say, be alert for a short intraday play. The 60-minute chart gets
negative below 1144.78, with the eight-period EMA right above at 1147.39, which
you should use as a pivot. Know your levels on the
(
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(
DIA |
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(
QQQ |
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a second entry.

Stocks today, and once
again, I’m not crazy about the setups, but if they want to keep these semis
green, look at
(
BRKS |
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(
IDTI |
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(
MXIM |
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(
MU |
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Also,
(
ADVP |
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(
INTU |
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(
SNPS |
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Two other stocks that you
might keep on your screen that have pulled back to their 200-day EMAs that might
attract some buying are
(
UNH |
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(
THC |
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On the shortside,
intraday short setups are
(
AOL |
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(
ISSX |
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(
ANN |
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(
BBY |
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Because of the nature of
this move and the tremendous amount of short covering, I am focusing more on the
index proxies and the major sector HOLDRs, like the
(
OIH |
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(
RKH |
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(
XLB |
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(
RTH |
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Have a good trading day.

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

Five-minute chart of
Tuesday’s NYSE TICKS