Reactionary Market

The NDX
100 dropped 4% right to the .618 RT zone of 2641,
hitting
an intraday low of 2638. After hours, due to the Microsoft warning, the QQQs hit
64, which is the equivalent of about 2560 on the NDX. When I left last night,
they had traded back up to 64 3/4, or 2595 on the NDX. The .786 level is 2547.
When you jot down your reference points you should do it on both a point and
percentage basis, as I have mentioned before. For example, the NDX gained 23.3%
from 2426-2991, so the .618 percentage retracement level is 14.3%, which is the
2563 level.
The alert zones are
just that as you become more aware of how price and volume start to react or
change as the averages or stocks start to approach these levels.


We are in a reactionary
market where fear has presided since the beginning of the fear season in early
September at the 4147 high. You were warned well in advance to protect your
holdings by hedging or selling while many were talking breakouts and new highs.
The hourglass is now upside down and most are singing gloom and doom. Don’t touch
them. They are the same ones that have missed one of the best trading
opportunities we have had since the parabolic moves. Many of the momentum stocks
have made huge moves over the last two weeks. Examples are
(
CIEN |
Quote |
Chart |
News |
PowerRating)
+83%,
(
QLGC |
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+80%,
(
SEBL |
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+75% and
(
ARBA |
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Chart |
News |
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+73%. Then you have Micron Technology
that hit a low of 28 right at its 27 1/2 .618 retracement zone and rallied 52%
to 42 1/2.


If you are a trader, you
are always waiting to pounce on a change in direction from key inflection
points. Today is Triple Witch and there will be many programs, some more
rebalancing and, hopefully, some big overreactions to Microsoft and/or the CPI,
which has become non-event data. Keep your reference points handy today for both
the SPX and NDX and know both the point and percentage retracement levels.
Calculate the volatility bands for both the SPX and NDX and watch for
convergence with the RT zones. At that point, you are looking for that change in
direction. If it happens, take it. But if not, then no entry, no loss.














face=”arial, helvetica”>(March Futures)


Fair
Value


size=2>Buy


size=2>Sell


20.45


 22 

 19.40 


Pattern
Setups


Stocks today: It will again
be a reaction day on your intraday charts, as only three NDX 100 stocks closed
above their mid-point yesterday, and this is after three straight days of bottom
of the range closes. Stay alert in the momentum stocks that have pulled back to
inflection points, such as
(
CIEN |
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Chart |
News |
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, which has pulled back to its 50-day EMA, 
(
QLGC |
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News |
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, to the 200-day EMA, and
(
SEBL |
Quote |
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News |
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, which has pulled back to its
200 EMA. You can work that 200-day EMA pivot point both ways, long or short.


Yesterday, you got
excellent continuation shorts in
(
BRCM |
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News |
PowerRating)
,
(
MERQ |
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News |
PowerRating)
,
(
ARBA |
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News |
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and
(
ITWO |
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.
Pick out any of the chosen ones today and be ready for the same kind of
continuation trades today. You should also be ready to play long on a reversal
of yesterday’s lows to the upside, but you should stick with those stocks that
are trading above their 200-day EMA.


Also, if they come for the
financials or the basics, take a look at 
(
STT |
Quote |
Chart |
News |
PowerRating)
,
(
AFL |
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News |
PowerRating)
,
(
IP |
Quote |
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News |
PowerRating)
,
(
TIN |
Quote |
Chart |
News |
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,
and also the semis, which acted especially well yesterday. They were green most
of the day, until the last knife down at the end of the day in the NDX.
Hopefully, if we get a Microsoft reaction, the semis will sell off and their
might be good intraday opportunities. 


Have a good trading day.

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