Moonshot

July 25, 2002
Kevin Haggerty

One
day can make a month if you
buy your ticket to the game at the lowest common denominator. Mr. Gann must have
been smiling yesterday as the SPX
(
$SPX.X |
Quote |
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PowerRating) reversed 69 points off the
775.68 intraday low on a major July 24 reversal day with the full moon. Whether
you’re fishing, trading or going out on Halloween, full moons get interesting.

In addition to Gann’s 50%
of the 1552.87 SPX high, the SPX and DJX had stretched beyond the long-term 3.0
standard deviation bands, just as they did last September. The DJX touched the
top of a strong confluence zone with a 7533 low yesterday. The 7500 zone is the
longer-term Bollinger Band and also the .38 retracement to the 1982 low. Certainly
all of the oversold indicators were obviously glaring, and the media/politicians
have reached emotional extremes. If you make them have a quiet period, the
markets would stabilize.

It was very hard to miss
the move yesterday, as the indices gave you three early defined entry patterns.
Using the SPX as an example, there was the initial Trap Door narrow-range signal
bar, which was the 9:40 a.m. bar with the 775.68 low. First entry was above the
777.31 high, on either futures or SPDRs. This was also the 1.28 volatility band.
The second entry was the breakout of the seven-bar range, with entry on either
the 10:25 or 10:30 a.m. bar. The third entry, and still below 800, was the
five-bar pullback to the 20-period EMA on your five-minute chart, giving you the
narrow-range inside-bar pattern setup. The DJX gave you the same sequence, as it
reversed 667 points from the 7533 low to the 8200 high and 640 points from the
first entry to that intraday high.

Regardless of when you
joined the game, this unusual moonshot gave you numerous chances to beat the
house. As I mentioned yesterday, the specialists and market makers are lugging
inventory because of the price persistence down, and combined with short
covering, programs, real buyers, in addition to an inflection point with strong
confluence, we got lucky with the magnitude of the moonshot.

After yesterday’s move,
we find the DJX right at 8200 point-and-figure resistance, and also at my 8183
second monthly resistance level. As I said the other day, I record monthly,
weekly and daily levels with three levels above and below a pivot number. I use
them in conjunction with other things, and it is just another awareness
tool.Â

The NYSE volume was big
at 2.8 billion shares, more than double its average. Advancing volume alone was
2.3 billion for a volume ratio of 82. Breadth was only +661, so it points out
the magnitude of the volume in the big-cap program stocks.Â

Have a good trading day.
I will be on vacation until Aug. 8. Have a good time in this market. I’ve got my
Quotrex and my cell phone, and the only thing I’m interested in is the next
level down, if it goes down, for long-term positioning, and that would be the
650 – 725 zone.Â