Prepare For The Generals

March 21, 2002
Kevin Haggerty

Yesterday
was a gap down, and then a
continuation down, without even an opening reversal for the SPX
(
$SPX.X |
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PowerRating),
which closed at 1151.85, which is the first close below the recent trading range
starting on March 6 between 1173.20 and 1152.04, which is on a closing basis.

The NDX
(
$NDX.X |
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Chart |
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PowerRating)
has already retraced 50% of its rally that started Feb. 22, closing yesterday at
1451. The .618 retracement is 1423, and the “A-B” equals
“C-D” leg is 1421, so there is symmetry. The “A-B” leg was
the March 11 high of 1573.42 to the 1470.49 March 15 low. The “B-C”
leg was 1470.49 to 1523.27, and subtracting the 102 point “A-B” leg
from 1523.27, you get 1421. This zone is certainly a potential reversal point,
and if not, then the .786 level at 1382.

The 11-day rally for the NDX was
+18.3%, which is strong in price and volume, so the shallow correction expected
before quarter’s end is not just beginning, it’s in progress. And if you’re
looking for some moving average crossover or other lagging indicator to ring
your bell, forget it.

The retracement levels
for the SPX are .38 — 1136, .50 — 1124, and .618 — 1112. The NDX had retraced
.618 to the September lows, while the SPX and DJX held at the .38 zone.

With the
first quarter ending next week and the portfolio managers starved to show some
performance, in addition to the strong rally we have had, I see the highest
probability to be a mark-up.
Go to the Stock
Scanner, run a list of the strongest relative strength stocks for the past
three months, using a filter of greater than the 20-, 50- and 200-day moving
averages, in addition to some institutional volume filter, which signifies a
big-cap stock. Then go through each daily chart beginning tomorrow. You should
look for pullback setups, consolidations at highs, especially just below
three-year to five-year highs, which I call roofers.

The Generals will lighten
up on the dogs into quarter’s end that haven’t taken off this quarter and try to
run their best stocks. Buy programs are certainly an integral part of any
mark-up, so Slim Jims in the high relative strength stocks is where it’s at if
the Generals have the opportunity to mark them into quarter’s end next week.

Stocks
Today

My DSL just went down, so
I can’t get into any of my stock data to screen for stocks. Covad just took over
bankrupt InternetConnect lines, and it was supposed to be up today, but now they
tell me 48-72 hours. And I won’t bet on that. I’ll be using my portable starting
tomorrow, so we’ll get back into stocks then.Â

Have a good trading day.