New Dow, New Possibilities
New Dow, New Possibilities The downtrend continued yesterday as the S&P 500 fell off in the afternoon (as the bonds faded), trading below its 200-day exponential moving average (EMA) of 1289 to close down 9 at 1281.90, right on the lows of the day. It was a wide-range bar and an outside day. The knife below 1298 continues.
| The new S&P swing point high is now 1308.30 |
It’s an excellent change for the Dow, and it will make many big-cap mutual funds obsolete. With the Diamonds (DIA) and your IRA hedged properly with puts and maybe some out-of-the-money call writing at times (depending on your skills), it opens up many possibilities. The Dow is now an excellent cross-section. If they dump Eastman Kodak (EK) and Phillipp Morris (MO), if only because of the legal clouds that looks like will be with them for a long while, an maybe add another drug and one more retail stock like Wal-Mart, it would be dynamite. I will explore different DIA strategies as we go.
The Fed governors were all over the tape yesterday, and it seemed to come just at new intraday lows. Their individual, subjective dialogue is useless and unnecessary. Mr. G. is the man, but maybe he is speaking through the puppets. Clinton took care of the drug rally with his jawboning, but the pullbacks will be met by institutional buyers.
The new S&P swing point high is now 1308.30. So now the test is whether the 1233.65 low is a 1-2-3 bottom or a double bottom. A key reference point is to look for a percentage retracement to that low, and then rally and close above the swing point high of 1308.30. If that happens, it could be the beginning of the November-April stronger seasonal trend, and the push by institutions to keep you in equities and not money market. Fees are the name of the game.
Both the DIA and the SPY closed at the bottom of their ranges on outside days, and below their 200-day EMAs, setting up possible continuation shorts today if we go that way. Stay on your five-minute charts for entry, in addition to entry from the daily chart. The addition of stocks to the Dow will also open up tremendous manipulation possibilities. The Dow, as a price-weighted average, can be gamed. There are around nine stocks in it at $90 or above, and if you throw in INTC’s volatility, all kinds of things can happen. So we’ll concentrate on those stocks for trade setups, because when they come for them, we want to be there.
Pattern Setups Pattern setups on the daily chart are very thin. Those to watch: Apple Computer [AAPL>AAPL], which is a narrow-range setup near its highs, Go2Net [GNET>GNET], Verisign [VRSN>VRSN], Network Solutions [NSOL>NSOL], only going above Monday’s high, Exodus Communications [EXDS>EXDS], again only above Monday’s high, and Lam Research [LRCX>LRCX].
| Program Trading Numbers | ||
| Buy | Sell | Fair Value |
| 9.00 | 6.O0 | 7.60 |
Editor’s note: Join Kevin and Larry Connors for our second live audio TradehardNews.com Forum– “Integrating the TradingMarkets.com Indicators With TradehardNews.com To Maximize Your Trading Performance.” Kevin and Larry will explain how they combine information from TradingMarkets.com and TradehardNews.com to take profits out of the market. It’s in the TradingMarkets.com Live Forum section this Thursday, October 28!
If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his series of tutorial articles.