Pivot Points

November 5, 2001
Kevin Haggerty

Nothing
was resolved on Friday, as
the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) and Dow were up +0.3% and +0.6%, while the NDX 100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating)
ended +0.1%. Volume dropped off to 1.118 billion, the volume ratio was 54, and
breadth a push at just +56. The SPX is still locked in its 1050-1111 range.
Starting out this morning, I see that the
(
SPY |
Quote |
Chart |
News |
PowerRating)s closed at 109.25 in a
narrow-range Slim Jim of 62 cents for the entire afternoon on Friday. The upper
boundary is 109.38 and the lower is 108.76. The 50-day EMA is 109.68. The high
for Friday was 109.38 and the low 107.87. You now have today’s pivot points for
market direction.

The
(
DIA |
Quote |
Chart |
News |
PowerRating)s had the
same closing range Slim Jim, with the upper boundary at 93.57, which was also
Friday’s high and the lower boundary at 92.86. They closed at 93.41. The first
downside pivot is below 93.20 and the second is below the lower boundary of
92.86. The closing range for the DIAs is right at the .618 retracement to the
Oct. 29 high of 95.53. A break out of the closing range could run the DIAs to
the 94.40 – 94.50 .786 level. The volume on Friday for both the DIAs and SPYs
was just about the lowest since August. The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s closed Friday at 35.60
with a closing range Slim Jim between 35.67 and 35.30. Friday’s high was 35.85
with the low down at 34.89. The 50-day EMA is 34.67.

You now have today’s
market direction outlined, which gives you the key pivot points. They say, and I
concur, that a stock’s movement is 50% market action, 25% group/sector, and 25%
fundamental. For the daytrader, it is technical, but you certainly do better
over time trading with the day’s trend in the strongest sector. If the stock is
also in a perceived positive fundamental position, it is all the better.Â

We have done well with
the strong sector, which is the semis, and you should still take any no-brainer
continuation entries the Generals give you, but stay ready to play any air
pocket short setups that develop when they get stretched, as in right now. The
(
SMH |
Quote |
Chart |
News |
PowerRating)s
closed at 38.80 in a Slim Jim between 39 and 38.31. The high of the 17-day
trading range is 39.35, and the .618 retracement to the Aug. 27 high of 48.68 is
39.90. The SMH volume for the past three trading days is at the high end of its
trading range volume. The 100-day EMA is just above at 40.25. The 50-day EMA is
37.15

This is the procedure you
should go through every day so you can just react at certain pivot points in
conjunction with intraday trend and market dynamics. After you prepare your
pivot point outline, you should also be aware of the volatility bands for, at
least, the major indexes.Â

Stocks
Today

In the semis,
(
KLAC |
Quote |
Chart |
News |
PowerRating)
closed at 45, with the 200-day EMA of 45.21 and Friday’s high at 46. You know
where the continuation long entry points are. If they take it above 45.21 and
then reverse the 200-day EMA to the downside, you should be ready on the short
side. Any other semis that have tight pivot points, in addition to being at key
inflection points, like the 250-day EMA, should be looked at the same way.

On the short side, as I
said before, start with the closing ranges of the SPYs, DIAs and QQQs, and that
should be your alert for any kind of downside action, and then you would look to
the semis, if the SMHs break down, for any air pocket short setups on your
intraday charts.

Have a good trading day.

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

Five-minute chart of
Friday’s NYSE TICKS

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Pivot Points

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