Reflex

  • February 12, 2001
  • Kevin Haggerty

The
Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) ended the week -8.5%
and has now declined 18.9% in 13 days, after 33% up in 15 days. The index tried
to rally off the retracement level on Friday but just managed +30 points from
2282 to 2312. It traded down to
2248 and closed at 2262 vs. the 1.5 Volatility
Band of 2259. The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) got down to the 2.0 band and .50 retracement zone of 1318 but it
rallied only 4 points and held 1318 for two hours before trading lower into the
close. The intraday low was 1310
and it closed at 1314.76. 


The news today reads,
“More Slow,” “Layoffs,” and a few stabs at Greenspan’s Fed
as it appears they made another mistake. I
have never seen anyone get put on a pedestal as he has for being wrong so often!
The other side of the coin is that they
are cutting rates and certainly there will be some tax cut agreed upon by the
Government. Read Tony Crescenzi’s
excellent piece, Prelude
to a Bull.


The more things change, the
more they stay the same with crowd psychology. When I talked about selling into
the resistance levels at 375-390 on the SPX and resistance on the NDX, most
people say, “No, it looks too strong.” But when it gets extremely
oversold, they are the opposite. Well, right now, we are almost at oversold and
you should be ready if we get the reflex rally.


The NDX closed just 28
points above another alert zone while the SPX is 11 points above one and 33
points above the lowest zone. There certainly was no indication of buying
pressure on Friday as both the NDX and SPX had very few closings above midpoint.
That means for daytraders today intraday changes in direction for longs or
continuation shorts in Techs and Chosen Ones — but you have the luxury of
waiting for the directional move. The position traders have to wait for a more
definitive change in direction, confirmed by volume and breadth.


There are still 70% of New
York Stock Exchange stocks above their 200-day moving averages, because the New
York Composite, the Mid Cap index (the MDY) and the Russell 2000 (RUT) are still
greater than their 50-day and 200-day moving averages. The tech-driven SPX and NDX are still
gasping for air below the 200, with the NDX -26% and the SPX -5.2% below the
200-day moving averages.

(March
Futures)

Fair Value

Buy

Sell

6.10

 7.40 

 4.80 

Pattern
Setups

If we get a fear day, look
at
(
CHV |
Quote |
Chart |
News |
PowerRating),
(
AIG |
Quote |
Chart |
News |
PowerRating),
(
AMGN |
Quote |
Chart |
News |
PowerRating),
(
CHIR |
Quote |
Chart |
News |
PowerRating),
(
BGEN |
Quote |
Chart |
News |
PowerRating), also
(
AHP |
Quote |
Chart |
News |
PowerRating)
and
(
MRK |
Quote |
Chart |
News |
PowerRating).

If we
get a tech reflex rally, look at
(
MXIM |
Quote |
Chart |
News |
PowerRating),
(
MU |
Quote |
Chart |
News |
PowerRating),
(
RMBS |
Quote |
Chart |
News |
PowerRating),
(
KLAC |
Quote |
Chart |
News |
PowerRating),
(
NVLS |
Quote |
Chart |
News |
PowerRating) and also the SMHs which have seen some good buying coming in here
between 49.50 and 52. The SMHs closed at 50.90.

Also
(
AVNX |
Quote |
Chart |
News |
PowerRating) which has gone from 39 to 83.5 in seven days and back to 40 in 16
days. Look for reflex off a
possible Triple Bottom here.

Other
stocks:
(
LEH |
Quote |
Chart |
News |
PowerRating),
(
GS |
Quote |
Chart |
News |
PowerRating),
(
FDC |
Quote |
Chart |
News |
PowerRating) and
(
AA |
Quote |
Chart |
News |
PowerRating). 

Have a good trading day.