Program Acceleration

March 29, 2001
Kevin Haggerty

Four
days up at +10.9% and one day
back at -7.7% as the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) took the air out of the ball. After
the gap down, it ranged for seven bars and then down from the Flip Top to the
2.0 Volatility Band at the 1632 zone which was -6% from the 1736 previous close.
It tried to rally from 1635 but could only make it to 1648.28. The NDX ranged
around a 2.0 Volatility Band before breaking to new intraday lows on the 1:50
p.m. bar, trading down to close at 1602.22.Â

This is the third gap-down
deal from
(
NT |
Quote |
Chart |
News |
PowerRating) since October of last year. The stock has declined from 89 to
the 16.75 on Tuesday, and then yesterday’s fiasco where it closed at 14. What
kind of surprise is Nortel, really? In its wake, they blew up the
(
CIEN |
Quote |
Chart |
News |
PowerRating)s,
(
JNPR |
Quote |
Chart |
News |
PowerRating)s, etc., and the program traders had a field day as they leg the
futures on the sell side, accelerating the decline and buying stocks from the
fear-induced “puke shots” of those that bought into the rally and got
stopped out.

To see the S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating)
program action, just look at yesterday’s five-minute NYSE tick chart. The best
way to change the current crowd psychology is not Greenspan or tax cuts, it is
simply shutting down program trading and Globex futures trading after the New
York close, and not reopening it until the New York opening.Â

This would stop the
artificial acceleration and the raids. This of course won’t happen and as
daytraders or short-term traders, we don’t really want it to happen, because we
want the artificial upside also from the futures-induced trading and programs.

Volatility is gold for
traders but can just murder retail. It doesn’t do the retail any good to
supposedly save a few pennies on a trade in decimals when the stock is 3 points
lower due to programs. FYI, saving the pennies is just a mirage if you get
different prices and have to pay additional ticker charges.

The NDX is right on the low
so it is a target for the program traders today. The SPX closed at 1153.29,
-2.4% vs. its recent low of 1081 where it began the 9.4% rally in four days.
Yesterday its 2.0 Volatility Band was 1151 and it rallied 8.4 points from
1150.10 to 1158.51, only to fall back and go sideways, closing at 1153.29.For
reference, the alert zones are .38 at 1153; .50 at 1132; .618 at 1120 and .786
at 1103.Â

(June
Futures)

Fair Value

Buy

Sell

9.30

.10.60

7.50

Pattern
Setups

We start this morning
prepared for more Trap Doors and Volatility Bands and we will incorporate any
inflection points, especially in the Semis where the SOX was down -7.7%
yesterday.Â

I
see that the S&P futures just turned green for the first time this morning
and the Nasdaq futures improved to -9, so who knows? We might get a little early
response to the upside rather than the Trap Doors, but be ready to go on any
continuation shorts below yesterday’s lows especially in the QQQs, SPYs and DIAs.

Have
a good trading day.

Program Acceleration

BUY THE FEAR, SELL THE GREED

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