Pawns

• December 19, 2001
• Kevin Haggerty

The
three major indices, in
addition to the
(
MDY |
Quote |
Chart |
News |
PowerRating), which is the S&P Mid-Cap Index proxy and the
(
IJR |
Quote |
Chart |
News |
PowerRating), which is the Small-Cap 600 proxy, have advanced three straight days.
Both the MDY and the IJR have been outperforming the major indices. Yesterday,
the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) went out +0.8% at 1143, the NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) at
+1.1%, and also the Dow at +1.1%. All of the sectors closed green with small
percentage gains, except the
(
$CEX.X |
Quote |
Chart |
News |
PowerRating) at +3.5%, led by
(
DOW |
Quote |
Chart |
News |
PowerRating), which
closed +6.0%. The
(
$BTK.X |
Quote |
Chart |
News |
PowerRating) and
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) both gained less than
1.0%. The SOX has recaptured 5.6% of the -6.8% it declined on Dec. 13. The semis
looked tired yesterday and had hardly any closes in the top 25% of the range and
is not your highest probability buying into a stock up three consecutive days.

In after-hours trading
yesterday, you had Micron
(
MU |
Quote |
Chart |
News |
PowerRating) earnings worse than estimates, and Triquint
(
TQNT |
Quote |
Chart |
News |
PowerRating) warned. TQNT was off -12.4% in late trading on 254,000 shares, while
(
BRCM |
Quote |
Chart |
News |
PowerRating) was off 2.6% on 102,000, and
(
RFMD |
Quote |
Chart |
News |
PowerRating) was -3.2% on 85,000. The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s in anticipation of early down on the opening for the semis were off
-1.1% on 424,000.
(
BBY |
Quote |
Chart |
News |
PowerRating) and
(
COMS |
Quote |
Chart |
News |
PowerRating) had positive earnings news, with
COMS up 13.9% to 6.05 at the end of after-hours. NYSE volume was 10% above
average at 1.3 billion, a volume ratio of 63, and breadth at +832, which
altogether is a positive scoreboard.

The program gang must
have read the commentary yesterday, as the afternoon game was delayed 15 minutes
due to rain, and the rally started on the 2:40 p.m. bar, rather than 2:25. We
won’t quibble because we were well warned that it was a lay-up for sequence
traders. The 2:40 rally started from the .50 retracement level between Monday’s
1131.88 afternoon low and yesterday’s 1145.10 intraday high. The 2:40 p.m.
reversal bar was the setup, and you got entry above that bar’s high. FYI to you
sequence traders: I trust you also saw that it was an RST buy pattern, so you
had a very high-probability confluence. 

The
(
SPY |
Quote |
Chart |
News |
PowerRating) hit an
intraday high of 115.15 and the expected initial resistance zone mentioned
yesterday. They traded down to 114.34 before the RST buy pattern, along with
the program gang, carried them back up to 115.09, closing at 114.98. We expected
action during this Dec. 17-19 period, and we got it, especially with the
three-day reversal in the semis and biotechs. The rest of this Triple Witch
week, you are just a pawn in the game. Be flat at night and play the intraday
setups only. Be on alert for those afternoon Slim Jims. They do pay the rent
when the games begin.

Stocks
Today

Daily chart setups on the
longside:
(
CCL |
Quote |
Chart |
News |
PowerRating),
(
AGE |
Quote |
Chart |
News |
PowerRating),
(
GS |
Quote |
Chart |
News |
PowerRating),
(
FDS |
Quote |
Chart |
News |
PowerRating),
(
ELNT |
Quote |
Chart |
News |
PowerRating),
(
NSM |
Quote |
Chart |
News |
PowerRating) and
(
MCHP |
Quote |
Chart |
News |
PowerRating). Also,
(
ADP |
Quote |
Chart |
News |
PowerRating),
(
GENZ |
Quote |
Chart |
News |
PowerRating),
(
WLP |
Quote |
Chart |
News |
PowerRating) and
(
EMLX |
Quote |
Chart |
News |
PowerRating).

In the energy area, you
have to be alert for them coming for them, look at
(
DO |
Quote |
Chart |
News |
PowerRating),
(
SLB |
Quote |
Chart |
News |
PowerRating),
(
APC |
Quote |
Chart |
News |
PowerRating)
and
(
CVX |
Quote |
Chart |
News |
PowerRating).

On the shortside, stay
with the index proxies because of the programs. 

The early look is red
with the S&P futures down 7 1/2 points, so we’re looking for Trap Doors and
Volatility Band setups. 

Have a good trading day.

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

Five-minute chart of
Tuesday’s NYSE TICKS