Nasdaq Short-Term Overbought

  • July 3, 2001
  • Kevin Haggerty

The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) made an early run
from 1224 to the intraday high
of 1239.78, which is right at the 1240 50-day EMA. The index has been trying to
get through that level since 6/21/01. From there the SPX went sideways, forming
two more peaks at 1239.35 and 1239.57. The 50-day EMA held back all three
attempts as the SPX closed at 1236.72.

The short term remains up
— as the 8-day SMA of the high is 1232, the 5-day EMA of the last sale is
1231.45 while the 8-day SMA of the low is 1217.49. This is one of my favorite
daily chart setups for short-term position trades. Utilizing the daily charts,
you use an 8-day SMA of the highs, 8-day SMA of the lows and a 5-day EMA of the
last sale. Throw this on your screen and go back and see how it keeps you in the
right game. I find the 8,3,3 slow stochastic useful to spot divergences. This
8,8,5 setup is also a favorite using the 5-minute charts, but can also be used
for other intraday time periods. The more convergence with other time frames,
the higher probability to trade. (This
information is in response to some of you on TradersWire Interactive.)

Today, the markets close
early and the trading will probably be thin and erratic. I suggest you be quick
on taking some profit on half your trades and then manage the other half with
tight stops, quickly moving to breakeven on the balance of your position.
Yesterday, the NYSE traded 1.1 billion shares which is right on its average,
while the Nasdaq traded 1.5 billion, which is approximately 80% of its average.
The Nasdaq volume ratio was negative for
the first time in the last five or so days, while the SPX remained positive.
The Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) has run 210
points or +12.7% in nine days, is short-term overbought, with minor cycle time
frames kicking in today and 7/10 which is next Tuesday. Caution is advised on
the long side.

(September
Futures)

Fair Value

Buy

Sell

7.00
8.20

5.80

Stocks
Today


(
BRCM |
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PowerRating),
(
KLAC |
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(
ADBE |
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and
(
VRSN |
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PowerRating) (both of which came out of their bases which we had in our
trading plans well in advance). 

In the financials,
(
FITB |
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PowerRating),
(
PNC |
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PowerRating),
(
COF |
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(
CMA |
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(
AIG |
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(
CD |
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(
CAT |
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(
QSFT |
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(
CSGS |
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(
ICOS |
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PowerRating). 

On the short side,
(
MERQ |
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(
VRTS |
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Chart |
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PowerRating) and
(
ERTS |
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PowerRating) if they decide to take ’em south.

Have a good trading day
and a wonderful Fourth of July weekend.

Monday’s S&P 500 five-minute chart
with 8-, 20-,
60- and 260-period
EMAs

Monday’s NYSE
TICK five-minute chart