Program Trading Prevails Today

March 16, 2001
Kevin Haggerty

After
three excellent days for
daytraders, yesterday didn’t get it done. The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating), after the
early rush up to the .786 retracement of the 1198 Wednesday high at 1182, fell
off to 1171 by 11:20 a.m. It then gave you a pullback long entry that was still
above the open, which only carried to 1179, then went sideways as the entire day
ended in a big Symmetrical Triangle bounded by about 1177 on the upper boundary
and 1172 on the lower.Â

Within that triangle was a
closing range with approximately the same numbers. It gives you a good
inflection point to start the day and play it both ways. If it comes out the top
and fails and reverses to the downside, accelerated by programs, it will be a
good short. The SPX finished +0.6% with a volume ratio of 60 and advancers over
decliners by +210.

The Dow scraped out an ugly
+0.6%, but the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) was another issue. The index gapped up, as
expected, hit its high of 1814 on the 9:40 a.m. bar, then went south out of a
1,2,3 pattern below 1788. It tried to hold at the .50 retracement from the March
14 low but only held it for an eight-bar congestion, then went south again on
the
(
ORCL |
Quote |
Chart |
News |
PowerRating)Â express, closing at 1697.92.

The only real long side
plays all occurred around that 11:00 a.m. – 11:30 a.m. time frame and they
weren’t long on price or time before they reversed south. It’s a much better day
when we get the big red fear opening down, rather than the half-hearted rally
attempt from a moderate gap up opening. The
program traders will be out and about today for expiration. FYI, the percentage
of program trading is now the highest since the 1994-5 period. It
appears that every company, tech or not, is warning, so they can clear the decks
if business picks up.

(June
Futures)

Fair Value

Buy

Sell

12.10

.13.50Â

Â 10.60Â

Pattern
Setups

Yesterday was all Banks,
Brokers and Utilities and certainly the volume was in the Utilities. I didn’t
like the Semi action either yesterday but they did fall back to their EMAs in
the afternoon tech selloff and we usually get some good intraday play around
these inflection points.