New Highs, But. . .

Yesterday the futures were up between 7-8 points before the opening, NYSE stocks gapped open, and the techs made their highs around 9:45 AM after the initial influx of retail buy orders. In the first 15 minutes the NASDAQ was up 20, the S&P was up 9.20, and the Dow was up 85 with the bonds down two ticks. All the major sector indexes were initially green as well, but it was to no avail, and we headed south until around 1:15 PM.

The NASDAQ finished the day down 54, the S&P gained slightly, and the Dow rallied 113. The best rally in the SPDRS came between 4:00-4:15 PM, trading from 136 1/2 to 137 1/4; I guess somebody wanted them to finish in the top of their range, but the move had nothing to do with the stock market.

Breadth was good; the up-down volume was excellent. The market made new highs, but not the way we wanted, with the gap opening and many of the momentum stocks giving back their gains from the past two days. Many of the patterns in these stocks showed minor reversal days after three or four straight up days, which is not unusual, but it wasn’t what we were looking for when they had a chance to come back and really blow them through the roof.

Around 8:30 AM ET, the screen looks like a mirror image of yesterday morning.

Target Stocks Of The Day  We’ve got some continuation patterns in stocks that set up and closed at the top of their ranges, which include Ann Taylor [ANN>ANN], Circuit City [CC>CC], Halliburton [HAL>HAL] (if they come for the energy stocks today), Citigroup [C>C], BankAmerica [BAC>BAC], Bank of New York [BK>BK], and American Express [AXP>AXP]. I could have thrown in some other financial stocks; they all finished with good patterns (near the top of their ranges), which should tell you something.

Two narrow-range patterns only to be taken in the direction of the trend are Federal Express [FDX>FDX] and TMX [TMX>TMX]. Look for intraday buy patterns in Avon [AVP>AVP] and Sun Microsystems [SUNW>SUNW], two high-momentum stocks that have pulled back to their 20-day exponential moving averages (EMA).

Pfizer [PFE>PFE] and Merck [MRK>MRK] are two interesting bottom-fishing stocks. They’re both trading at their 200-day moving averages. Unless there’s a bad story, look for the elephants to start buying, or a timely research recommendation to suddenly appear on the tape today or tomorrow.

Program trading numbers  Buy: 9.78. Sell: 4.92. Fair Value: 7.24.

Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.