Reflex

• February 8, 2002
• Kevin Haggerty

The
markets gave us another bell curve day after
the early emotion down once again set up a good bounce from the 108.20 first
intraday low on the
(
SPY |
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PowerRating)s to the 109.86 intraday high by 11:45 a.m. The
SPYs then rolled over and got a knife move down in the last hour to make a new
intraday low at 108, and closing there. You have the numbers for the next two
retracement levels at .50 and .618. 

The
(
QQQ |
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PowerRating)s had a
similar move, bouncing from 35.45 vs. its 35.22 .50 retracement level to its
intraday high of 36.55, then declining into the close of 35.19. It’s a
daytrader’s market with quick reflex moves from alert zones, but not allowing
you to be lax on moving your stops up because these emotional and program reflex
moves certainly haven’t carried through. We start today at the .50 retracement
level on the QQQs and 35.15 is the 1.27 Fib extension of yesterday’s leg up to
36.55, so you should be alert. For
you point-and-figure enthusiasts, you have some mass at 35. As I have mentioned
in previous texts, a couple of cycles coincide next Monday and Tuesday.

NYSE volume was 1.4
billion, with a positive volume ratio of 54, in spite of the late sell-off.
Breadth was slightly negative at -297. The volume ratio continues to improve as
prices make lower lows, so that’s a positive divergence. It usually ends one of
two ways: either a bounce from this current level at the Fib zone, or a big fear
day that takes, for example, the QQQs closer to the .618 retracement level at
33.33, and then a violent trading reversal. After the first rally day’s close,
the next day will be a gap open, which takes away much of the action for those
that have not already taken a position. If this was a classic uptrending market,
then you could buy continuation by the Generals. But it’s not. And selling
retracements while buying oversold rallies at key alert zones has been the
daytrader’s profit opportunity.

The NYSE data is in the
bullish oversold zone, with the Nasdaq extremely oversold short-term. There are
two cycles on top of us, and we are at a key Fib retracement level. I assume you
have a game plan to react.

Yesterday’s group
scorecard was all
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), as it declined -5.0% vs. the NDX
(
$NDX.X |
Quote |
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PowerRating) at -2.2%. The
(
$SPX.X |
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Chart |
News |
PowerRating) and Dow
(
$INDU |
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Chart |
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PowerRating) ended at
-0.3% each. 

Stocks
Today

There certainly aren’t
lots of setups on the longside due to the last-hour sell-off, and that’s
adhering to our policy of making sure the stocks close above the midpoint for
any kind of buy setups. A few setups are
(
AVY |
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Chart |
News |
PowerRating),
(
DHR |
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News |
PowerRating) and
(
ITW |
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Chart |
News |
PowerRating).

On the shortside, if they
take them south, look at
(
AMAT |
Quote |
Chart |
News |
PowerRating),
(
LLTC |
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Chart |
News |
PowerRating),
(
MMM |
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News |
PowerRating) and
(
QCOM |
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Chart |
News |
PowerRating).

I suggest on the longside
you focus today on the QQQs, SPYs and
(
DIA |
Quote |
Chart |
News |
PowerRating)s for reflex bounces from the Fib
zones.

Have a good trading day.

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

Five-minute chart of
Thursday’s NYSE TICKS