Pullback Alert

• December 12, 2001
• Kevin Haggerty

For
the fourth consecutive day, NYSE
down-volume exceeded its up-volume, with the S&P 500
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$SPX.X |
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declining all four days, losing 3.0%. I would call it a reluctant pullback at
this point, and it appears the Generals are looking for entries on the pullback.

That was evident
yesterday in some of the biotechs that have declined for three days close to
their 50- or 200-day EMAs and bounced off these moving averages to close above
the mid-point, indicating some buying pressure. That puts us on alert to look
for some continuation long entries if the Generals show up today. I won’t even
comment on yesterday’s futures joke around Greenspan.

NYSE volume was 1.357
billion, a volume ratio of 43, with breadth improving significantly to just -26
from -1209 on Monday. The NDX 100
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$NDX.X |
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COMPQ |
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positive divergence at +1.0% for the NDX 100 and -0.3% for both the SPX and Dow.
This positive divergence and breadth improvement after a three-day pullback,
puts me in an alert mode for buying pressure to resume today or tomorrow.

There was positive sector
divergence also yesterday in the semis, software, banks, brokers and chemicals,
as well as the oil service stocks sticking their heads up. I would say you
should put most of your focus on the semis and biotechs, anticipating the
Generals to dance with what brung them this far since the September low.

The SPX closed at 1136.76
and has some pretty good resistance to overcome from 1150-1160 and again from
1174-1208. There are 11 1/2 days left in 2001, with the Nasdaq -19%
year-to-date, the SPX -13.9%, and the Dow -8.3%. I don’t think that the Generals
can get the Nasdaq and SPX to break even by year-end, but the Dow is attainable.
That means we want to watch the big Dow stocks like
(
IBM |
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(
MMM |
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closely to be ready to ride if the year-end game is on.

Stocks
Today

In the semis, look for
early intraday long setups in
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ISIL |
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(
MSCC |
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(
KLAC |
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(
AMAT |
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(
NVLS |
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(
BRCM |
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(
MXIM |
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Pullback setups from the
daily charts in the semis include
(
BRKS |
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(
KLIC |
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Also, the Big Three game
watch intraday consists of
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NVDA |
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(
QLGC |
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(
GNSS |
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accidents waiting to happen, but they love to play in those stocks.

In the biotechs,
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ICOS |
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(
IDPH |
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(
GENZ |
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(
TKTX |
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Other stocks:
(
IBM |
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(
MMM |
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(
AA |
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(
YUM |
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(
MERQ |
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(
BRCD |
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(
AGE |
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(
SLR |
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(
FDX |
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(
IGT |
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(
SYMC |
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PowerRating).

Have a good trading day.

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

Five-minute chart of
Tuesday’s NYSE TICKS