Program Acceleration

July 26, 2001
Kevin Haggerty

The
programs continue to dominate the
indexes, as yesterday reversed Monday’s -1.6% on the S&P 500. The selloff on
Monday was led by several large brokerage firms hitting the futures early and
hard, which took out the day. Yesterday, after a brief contra-rally from
10:00-10:30 a.m., both the
(
NDX |
Quote |
Chart |
News |
PowerRating) and
(
SPX |
Quote |
Chart |
News |
PowerRating) declined, and it looked like
a repeat of Monday. The NDX declined to its intraday low of 1581.67 on the 1:30
p.m. bar, holding just above the previous day’s low. This is on your five-minute
charts. This downleg was a 1.27 extension of the contra-leg up. The SPX diverged
by not making a new intraday low on the morning decline and started its
afternoon uptrend on the 12:40 bar. The NDX gave us a 1-2-3 long entry on the
14:05 bar as it rallied to close at 1627.86, +1.4% on the day. The SPX had
preceded it with a 1-2-3 long entry on the 13:50 bar and rallied over 12 points
from point of entry, as many futures traders walked away with smiles. The SPX
closed at 1190.49, +1.6% on the day, as did the Dow, which finished at +1.6%.

At the same time that the
NDX gave us a 1-2-3 entry, so did the
(
SOX |
Quote |
Chart |
News |
PowerRating). When you saw that, you should
have looked at the individual Semi stocks, and you would have seen
(
KLAC |
Quote |
Chart |
News |
PowerRating)
and
(
ADI |
Quote |
Chart |
News |
PowerRating) coming, among others setting up the same way. And the beat goes
on. Program games go a long way in making daytraders smart, and any real buying
by the Generals was accelerated by the programs. When Generals on the sidelines
with too much cash see price momentum, it forces their hand in fear of missing a
decent move.

The market dynamics for
the NYSE were much better than the Nasdaq yesterday, as there were 1.3 billion
shares, a volume ratio of 74 vs. the Nasdaq volume ratio at 53. The New York
breadth was also better at +728 advancers over decliners vs. +156 on the Nasdaq.
Certainly not a surprise, as fear has the edge and the portfolio managers are
reluctant to wake up the next day with another tech wreck surprise and the
retail customers are still licking their wounds.Â

I got a chuckle this
morning when I turned on the empty suits at 5:15 a.m. just in time to hear
another semiconductor chairman tell us the Semis have bottomed. This was the
Chairman of Taiwan Semiconductor
(
TSM |
Quote |
Chart |
News |
PowerRating). It amazes me how different their
crystal balls are. After 10 minutes of Bob and Liz drone, I shut it off and went
to the office, not to be turned on again until 5:15 a.m. tomorrow morning for my
next bit of insignificant news.

(September
Futures)

Fair Value

Buy

Sell

4.70

5.95

3.50

Stocks
Today

There certainly was
follow-through yesterday in the Energies, with the
(
OSX |
Quote |
Chart |
News |
PowerRating) +4.3% and the
(
XOI |
Quote |
Chart |
News |
PowerRating)
+4% as they have rallied five days since we spotted the across-the-board volume
increase, expansion of range and top-of-the-range closes on July 18. You saw all
of that on the Change in Direction screen, right? If you didn’t, then get with
the program because it’s good for your wallet when you spot an early move.Â

If the move is to be more
than a short-term pop, there will be a pullback-and-go opportunity. For example,
Schlumberger
(
SLB |
Quote |
Chart |
News |
PowerRating) has gained 20% low-to-high in just six days and +12.3
from entry-to-high after identifying the trading opportunity on the Change in
Direction screen. You get my message.

There are many good
setups from yesterday, as more S&P 500 stocks finished in the top of their
ranges than I can remember. That is a combination of late afternoon programs,
along with some real buying by the Generals. You’re certainly ready for any
continuation moves to the upside today.Â

On the short side, just
stay with the QQQs, SPYs and DIAs. Whatever your pleasure.

Have a good trading day.

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

Five-minute chart of
Wednesday’s NYSE TICKS

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Program Acceleration

BUY THE FEAR, SELL THE GREED

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