Report Card Time

July 25, 2000
Kevin Haggerty

Yesterday
fell into the category of “Who Cares?” as
total volume dwindled to 881 million and institutional blocks at only 18,608.
Breadth was negative and the volume ratio dropped to 31 for a four-day moving
average of 39, which is just about right for a rally going into report-card time
the rest of this week. Both the NDX and S&P 500 have retreated to their
50-day EMAs. The S&P 500 closed at 1464.30 with a 50-day EMA of 1463.55 and
the NDX at 3791, with its 50-day EMA at 3777. You can now use these 50-day EMAs
as pivot points long or short. With four more days in the month, you certainly
want to be alert for buy setups but the 50-day EMA can be a pivot point for the
short side also.

The volatility in the
Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) over the past five days has been, I’m sure, unsettling for
position traders, but it’s been nothing short of dynamite for daytraders. For
example, the last five days starting with Tuesday, July 18, has gone -2.5%, -3%,
+3.9%, -2.2% and yesterday at -3% for a net loss of 6.8% over this five-day
stretch. It leaves the NDX 100 right at the 50-day EMA going into report-card
time. If the portfolio managers
show up the rest of this week, I would expect the big-cap techs like Intel,
Cisco, EMC, etc., to get a bit of wind at their backs.

On the short side, you
should have caught the continuation short entries in the QQQs
(
QQQ |
Quote |
Chart |
News |
PowerRating) and Advanced Micro Devices
(
AMD |
Quote |
Chart |
News |
PowerRating). That’s the kind of day it was. The
S&P 500 gave you a clear direction signal as it broke down from a 1-2-3 top
below all three EMAs, the 20, 60 and 260 on the 12:00 p.m. bar on your
five-minute charts and remained below all three EMAs through the close. If
you review the charts from the past text, you will see that a breakdown from
this pattern below all three EMAs is a high-probability trade in the QQQs, SPYs
or related stocks.

The reason for the drugs
and brokers on yesterday’s list was simply because on Friday, which was a down
day, the drugs and brokers closed above their midpoints on increased volume
despite a -1% day for the S&P 500. When most of the stocks in a group buck
the trend and buying pressure is stronger despite a down-market day, these
stocks should go on your buy alert list for entry the following
day.Â Â Â Â Â

I use RS and ADX only for
compiling a master list to be checked, but as we discussed at the seminar, it is
where the stock closed in its range, volume, in addition to range and price
expansion on a daily basis that gives us clues as to what the Generals are doing
now.Â

(September Futures)

Fair
Value

Buy

Sell

13.60

14.70

12.45

Pattern Setups

Slim pickings from the daily charts as
only one stock in the NDX 100 closed in the top 25% of its range and none of the
MSH 35 index. That tells you that tech-trade opportunities on the long side must
come from your intraday pattern selection if the oversold report-card rally
starts today.

As I look at the screen, it’s about
8:15 a.m. ET and the futures are up 3 points and all the lead momentum stocks
are basically all green.

Have a good trading day.

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Report Card Time

BUY THE FEAR, SELL THE GREED

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