Reflex

• April 24, 2002
• Kevin Haggerty

The
SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) traded in just a 6 point range from
the opening until the 3:25 p.m. sell program broke the trading range low and
took it down 6 more points to a 1099 low, closing at 1100.96, which is the 1100
level referred to in yesterday’s
text. The index was -0.6% on the day. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) had the same
pattern, with the DJX
(
$DJX.X |
Quote |
Chart |
News |
PowerRating) closing at 100.89, -0.5% on the day. The
volume ratio remained positive all day until the sell program started, and that
was in spite of the downward drift of the NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating), which went trend
down out of a triangle (see your five-minute charts) on the 12:25 bar and closed
at 1322.81, -2.0% on the day. This is a 6.5% decline now in five days, following
the +4.2% day on April 16. 

NYSE volume was a bit
above average at 1.3 billion, volume ratio of 45, and breadth a push at just -8.
The Nasdaq
(
$COMPX |
Quote |
Chart |
News |
PowerRating) had a volume ratio of only 22 on 1.9 billion, or 10%
above its average volume. The biggest negative was, of course, in the NDX 100,
which traded more than 20% above its average volume and a volume ratio of just
18.

Most all sectors finished
red, except for the war stocks, with the
(
$OSX.X |
Quote |
Chart |
News |
PowerRating) +1.9% and
(
$XAU.X |
Quote |
Chart |
News |
PowerRating) +1.4%. Some of the semis tried to hang on, but to no avail, in
spite of the better book-to-bill, as the
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) ended the day at -3.1%
for the fourth down day in succession, which totals -9.5% over the four days.
Yesterday’s close of 555.20 put the SOX below all of its daily chart EMAs, with
the 200-day being 566.

The basic oversold
indicators put the NDX in a very oversold position. Option activity also
suggests we get an oversold upside reflex in the SPX and Dow. The semis should
continue to be your focus for an early read on any sustained market recovery.
Nothing happens without chips, and I’ve played this broken record for you many
times so you will stay focused on it.

FYI: If you check your
monthly chart on the SOX using a 3-month and 12-month EMA, you will see that
it is in much better shape than the NDX and SPX. The SOX closed at 555.20, with
the 12-month EMA at 557.90 and the 3-month at 560.38. This is a key
inflection zone for the SOX. The DJX closed at 100.89 vs. a 12-month EMA at
100.65 and a 3-month at 101.53. My first look at a longer-term trend always
starts with the monthly chart with the 3- and 12-month EMAs.

If you want a “woulda,
coulda, shoulda,” check the same monthly chart for the
(
IJR |
Quote |
Chart |
News |
PowerRating) Small Cap 600
Index Fund, and you’ll appreciate the fact that there is always something
positive in the market. The trick is, do we take it when we see it? The answer
for most of us is probably no because our emotions are swayed by the influence
of the bigger negative decline of major indices like the NDX and SPX and all the
media hype that surrounds it. 

Stocks
Today

I apologize for the
screens today. Obviously there are some issues on the site.

In the semis, they don’t
set up on the daily charts, but on an oversold bounce, I like
(
KLAC |
Quote |
Chart |
News |
PowerRating),
(
NVLS |
Quote |
Chart |
News |
PowerRating) and
(
TXN |
Quote |
Chart |
News |
PowerRating), which have all pulled back again to their 50-day EMA.
Also,
(
MCHP |
Quote |
Chart |
News |
PowerRating) and
(
QLGC |
Quote |
Chart |
News |
PowerRating), which has pulled back to its 200-day EMA.

Other stocks that do set
up on the daily charts are
(
ESL |
Quote |
Chart |
News |
PowerRating),
(
ATK |
Quote |
Chart |
News |
PowerRating) and
(
LMT |
Quote |
Chart |
News |
PowerRating).

Also,
(
TKR |
Quote |
Chart |
News |
PowerRating),
(
DGX |
Quote |
Chart |
News |
PowerRating),
(
STJ |
Quote |
Chart |
News |
PowerRating),
(
AZO |
Quote |
Chart |
News |
PowerRating),
(
CBH |
Quote |
Chart |
News |
PowerRating),
(
EMMS |
Quote |
Chart |
News |
PowerRating) and
(
PNRA |
Quote |
Chart |
News |
PowerRating).

In the biotechs on an
oversold bounce, I’d look at
(
IDPH |
Quote |
Chart |
News |
PowerRating), and if the biotechs go soft again, on
the shortside, I’d look at
(
AMGN |
Quote |
Chart |
News |
PowerRating) and
(
CHIR |
Quote |
Chart |
News |
PowerRating).

On other things to short
if we do go south, I’d stay with the proxies.

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