Moon Shots

July 13, 2000
Kevin Haggerty

The
S&P 500 had a nice rush yesterday after
having crossed the 20-period EMA at the 1488 level on the 12:50 p.m. bar on your
five-minute charts, which put it above all three EMAs — 20-, 60 and 260. It ran
to an intraday high of 1497.64 on the 2:35 p.m. bar. At that point, it gave you
an outside-reversal bar, which also closed below the low of the previous bar. It
then tailed off to 1492.29, before closing at 1492.92 in the top part of its
range and +0.8% on the day. The Dow ended +0.5% but the star of the game was,
once again, the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) as it closed at 3901, +4.2% for the
session.Â

Total volume increased to
just over a billion shares, the volume ratio remained steady at 57 with a
four-day moving average of 60, and institutional blocks increased to 21,795. For
those of you who keep the dynamics on a daily basis, the IBD was wrong today.
The breadth was positive for the eighth straight session with advancers over
decliners by +590. The last eleven of twelve days have been positive and this,
of course, is exemplified by 59% of New York Stock Exchange stocks over their
200-day moving averages.

It’s rather amusing since
we have watched the dynamics improve since the 2897 low on May 24, and I turn on
the TV this morning and they are still babbling about whether or when on the
“summer rally.” Regarding the NDX 100, we are now into a +35% rally
from the 2897 low, so what’s up with that? Many moons ago, when we framed the
NDX 100 from the October ’98 low of 1063 to the March 24 high of 4816, we got
the following alert levels:

The .50 retracement zone
was 2939 and the .618 was 2497 and a 2% band above and below these numbers is
generally where you will get a reversal. Lo and behold, the exact low was 2897
on May 24, which was a 51% retracement from the 4816 high and just 42 points and
1.4% below the exact 2939 .50 retracement level. At that point, it gave us a
1-2-3 close entry with two swing points: one at the May 24 low and the second
off the May 26 low. On May 30, it crossed its 200-day EMA of 3375 and hasn’t
traded below since, while they still wait for the “summer rally.”

Right now, the thought
process would be on framing the NDX 100 to the upside from the 2897 low which
you should still have, if you saved the specific commentary that alerted you to
those levels. For those of you who didn’t, I will repeat it: Framing
the NDX 100 from the 2897 low to the 4816 high, we get a .50 level of 3857
and a .618 level of 4083. On June 20, the NDX had a high of 3990, which was a
.43% retracement and where the rally halted, and then it did the 3800-3600
trading-range bit.Â

So here we are at 3901
and assaulting the 4083 zone again which, if reached, will see some definite
resistance which, if you check your daily chart, is where the NDX 100 confirmed
its downtrend, breaking below its 4050 minor low and then below its 50-day EMA
which had turned over. Making it to the 4083 level would put the NDX up 40% from
its 2897 low and the higher probability is that would hold the “summer
rally” for a quick air pocket down. Of course, we are almost there at +35%
and in a very weak seasonal time frame especially July, while September and
October loom on the horizon.

Net, Net, we are well
into the so-called “summer rally” and should be thinking of how to
protect your long-term positions to the downside as resistance appears at the
alert zones. There continues to be some excellent moon shots in the volatile
stocks as the froth builds. Yesterday, Power-One
(
PWER |
Quote |
Chart |
News |
PowerRating) gapped open at 118
13/16 above the prior 115 1/4 close and traded down to just 117 1/4 which was
still above Tuesday’s high of 116 5/8. The ensuing move on an opening reversal
above 118 3/16 was powerful as it traded to a high of 138 1/4 and closed at 135
1/8.Â

Program
Trading Numbers

(September Futures)

Fair
Value

Buy

Sell

15.75

16.85

14.55

Pattern Setups

Have a good trading day.

Moon Shots

BUY THE FEAR, SELL THE GREED

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