Program Friday

May 18, 2001
Kevin Haggerty

Both the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) and S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) had a strong early run on the first
seven to eight bars, with the NDX gaining a quick 44 points and the SPX 12
points. From there, both indexes declined to their early lows and then with the
program agendas resting, we caught the day’s best defined trend with clear
pattern entry. Just as on the
previous day, both indexes gave you a 1,2,3 Close entry followed by a 1,2,3
Higher Bottom Trend entry.

The NDX ran another 44
points from the first entry at 1912 to the 1956 intraday high — hello
(
QQQ |
Quote |
Chart |
News |
PowerRating)s
— just before 1:30 p.m. The SPX ran 12 points from its 1,2,3 Close entry. From
1:30 p.m. on, both indexes drifted down. There is no better book than to save
your charts every day, make notes on them about what you did and didn’t do, in
addition to a few comments about the market dynamics that day. You will see
certain patterns repeat over and over, and will be much better prepared when you
see it again. Remember, the dynamics make the pattern, while the pattern alone
is just lines on a chart.

There was significant
program trading yesterday in front of today’s expiration — and has been all
week. Programs accelerate the market in the direction it’s going, which
magnified this week’s real buying by the Generals. The SPX came out of its
sideways consolidation this week and is bumping up against the high end of its
resistance — which you have from Wednesday’s
text. The NDX closed at 1925,
had an intraday high of 1956, and is attempting to get out of the top of its
range which is 1982. Above that, is the resistance at 2087, the last breakdown
to lower lows which coincides with the .50 retracement zone at 2060.

I am told by certain Street
bookies that on expiration day, the market rises 65% of the time and drops 35%
of the time, while on the first Monday after expiration, the market declines 60%
of the time and advances 40% of the time. I’ll take them at their word as I
don’t do that kind of homework because you don’t trade statistics, but I will
jot it down and observe the action carefully today because we are bumping up
against resistance and have had a good run. We are entering a time zone,
according to Carolyn Boroden’s work.

The decision is whether or
not to be long puts over the weekend against any current longs you might have —
which is the most prudent decision in my opinion. You have to take some money
off the table when you can, not when you have to.

Stocks
Today

(June
Futures)

Fair Value

Buy

Sell

2.95

Â 4.25Â

1.60Â Â

Program traders own the
action today even more so than they do the other days, so it is best to just sit
around and wait for obvious entries like Slim Jims, 1,2,3 reversals after a
significant move, and breakouts from consolidations to new intraday highs or
lows. The moves are usually shorter and more erratic, so manage the trade
smartly.

Have a good trading day.

Chart 1. Five-minute chart of
yesterday’s S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) with 8-,
20-, 60-
and 260-period EMAs.

Chart 2. Five-minute
chart of yesterday’s New York Stock Exchange ticks.

Tim Truebenbach
on TradingMarketsWorld! Tim Truebenbach will be appearing on the
Intermediate-Term Trading board Thursday, May 24 at 8:00 ET. Be sure to take
this opportunity to chat with and have your questions answered by a leading
intermediate-term trader. Click
here to take your trading to a new dimension.

Program Friday

BUY THE FEAR, SELL THE GREED

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