Morning Madness

• May 8, 2002
• Kevin Haggerty

Yesterday,
the SPX
(
$SPX.X |
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PowerRating) traded in an 8 point range all day until
the last two five-minute bars made a new intraday low at 1048.96 and closing at
1049.49, -0.3% on the day. The NDX
(
$NDX.X |
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the basics were small green, which had the Dow
(
$INDU |
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+0.3%.

Some of the banks and
most of the major retail stocks closed green. The semis were mixed, with the
best performances put in by
(
KLAC |
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(
NVLS |
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points. The
(
SMH |
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us an excellent Trap Door with entry on the 10:10 a.m. bar, above the signal bar
high of 36.78. They traded up to 38.19 before fading in the afternoon. The
signal bar low was 36.45 vs. the .618 retracement level of 36.05. The entry
pattern in a key retracement zone gave us a good trade, and for some, the start
of a good position. If you played the Trap Doors in KLAC and NVLS, you were
rewarded. Both the stocks are still in the 200-day MA zone. 

NYSE volume picked up to
1.353 billion shares, with a volume ratio of 39, and breadth -386, so the
Generals certainly didn’t tell us they care yet. The Nasdaq, on the other hand,
did show some improvement in the internals. Volume jumped up to 2.1 billion
shares, the second most in five days, while the volume ratio improved to 54 vs.
its three-day oversold average of just 19. Breadth was -626. Volume precedes
price, and you always see it show up there before you see it in the breadth.
The 1.123 billion up volume was more than
the previous three days combined. That always puts my antennae up. Also, the US
dollar advanced and gold shares weakened, and that’s usually a precursor to a
rally.

The VXN has increased
from 36.21 to an intraday high of 51 yesterday, right at its 200-day SMA of
50.90. It closed below the midpoint at 50.12 on a narrow-range bar. This is in
line with the move down to the key inflection point levels in the Nasdaq
Composite,
(
QQQ |
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PowerRating)s,
(
XLK |
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Stocks
Today

The early green will
provide ammo for the pros to gap the openings as I’m sure that the persistent
downtrend has made them longer in inventory than they would like, so you can bet
they will accelerate any upside follow through. If the pigs show up at the
trough today, Slim Jims and first consolidation breakouts at new intraday highs
will be rewarded.

Continue your focus in
the
(
SMH |
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PowerRating)s and the
(
XLK |
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PowerRating)s. Also,
(
NVLS |
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PowerRating) and
(
KLAC |
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key semis yesterday on both price and volume, so stay with them as they will
probably give RST entries today. Both stocks closed in the top of the range
after bouncing off their 200-day moving averages. Three bottom-fishing semis
would be
(
NVDA |
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PowerRating),
(
LTXX |
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PowerRating) and
(
RFMD |
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PowerRating), which is nothing more than a beach ball
for traders.

Other stocks:
(
SYMC |
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PowerRating),
(
HD |
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PowerRating),
(
KSS |
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(
OSI |
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(
MAS |
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(
WHR |
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(
DD |
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(
EMN |
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PowerRating),
(
YUM |
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PowerRating),
(
EFX |
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PowerRating),
(
SLM |
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(
ACF |
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(
PECS |
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PowerRating),
(
PNRA |
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PowerRating),
(
KRON |
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PowerRating) and
(
FHCC |
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PowerRating). 

Have a good trading day,
and have fun, still keep your stops tight.

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

Five-minute chart of
Tuesday’s NYSE TICKS