Pivot Points

July 31, 2000
Kevin Haggerty

In the
July
25 commentary, I said that
with four more days in the month, you certainly wanted to be alert for buy
setups but the 50-day EMA can be a pivot point for the short side also. The
S&P 500 and the NDX had a seven-day pullback to the 50-day EMA after hitting
the .786 retracement level for the S&P 500 and the .618 level for the NDX,
both almost to the number. It wasn’t a surprise that the two averages reacted at
the retracement levels but it was a surprise how quickly the techs and related
were taken down at report-card time.Â

Having been out on
Thursday and Friday, the first thing I did on returning was to check the S&P
500 and NDX 100 to see which stocks were the best- and worst-performers over the
past five days and where they ended the week relative to their 50- and 200-day
EMAs. I then made up a potential long list with those stocks above their 200-day
EMAs and a sell short list of those stocks below the 200-day.Â

The next thing I did was
to frame the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating), just like we did before to be aware of the
alert levels and, as I mentioned, the .618 level for the NDX 100 stopped it
cold, so it is always good to outline the numbers just to make you aware of any
change in direction at these levels. The techs and related, especially the semis
and telecommunications stocks led the parade and this market is going nowhere
without some tech leadership.

Looking at the positive
side of the NDX 100, which closed Friday at 3477, minus 11.1% on the week and
just below its 200-day EMA of 3518, we get the following levels:Â .318
3636; .618 3352Â and .786 at 3152. These
levels are calculated by using the 2897 May 24 low and the .618 retracement high
of 4089 on July 17.

Looking at the negative
scenario, I get the 2160-2170 level as the possible decline zone if fear
prevails. For the S&P 500 which closed Friday at 1419.90, just below its
200-day EMA of 1422.78, I get a .618 retracement level of 1420 and a .786 at
1394. These levels were framed using the 1361 and 1517 high. After just two days
out, I am now looking at the 200-day EMAs as the long/short pivot point rather
than the 50-day EMA. For potential long positions, I look first for those stocks
still above a rising 50- and 200-day EMA and are right at the 50-day EMA pivot
point and secondly the 200.Â Â Â Â

(
JDSU |
Quote |
Chart |
News |
PowerRating) is an example
of a stock which, after a big down on Friday, closed at 116 1/4 just above its
50-day EMA of 114.18 and down from its 140 1/2 recent high in just three days. I
don’t have the slightest idea where JDSU is going and care even less, but it is
a stock that you should be aware of for possible strong reflex bounce and be
checking for aÂ pattern entry on the intraday charts.

Framing the SOX, the
semiconductor index, which closed Friday at 957, just above its 200-day EMA of
957.29, you get a .618 level of 997 and a .786 level atÂ 920, so we are,
right now, in the alert zone. The negative projection on the downside is down to
the 746 zone.

(September Futures)

Fair
Value

Buy

Sell

11.50

12.70

10.10

Pattern Setups

Also the QQQs either recrossing the
200 to the upside, or taking out Friday’s low. You must also be ready for
reversal of your entry-point low or the 200-day EMA.

Hope you have a good trading day.

Pivot Points

BUY THE FEAR, SELL THE GREED

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