Rising Price, Declining Volume

• February 12, 2002
• Kevin Haggerty

The
markets gave us a continuation of the reflex bounce, as
the 60-minute trend remained positive all day, and you took the intraday long
setups, which were plentiful. It was an excellent Slim Jim day. The volume ratio
was excellent at 81, following 76 on Friday. Breadth was again very positive at
+1092, but the NYSE volume dropped off to 1.1 billion from 1.4 billion on Friday.
Both the SPX
(
$SPX.X |
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(
$INDU |
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100
(
$NDX.X |
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(
$SOX.X |
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day, up 3.8%.

Unlike the
(
SPY |
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(
DIA |
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(
SMH |
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44.68, right at the down trendline from the 48.45 high, with the 200-day EMA at
45.45, which will be a good spot for shorts with stops above 45.68. The reward
to risk is excellent if the SMHs trade down through the head-and-shoulders
neckline that has formed. The head-and-shoulder projection to the downside is
33-34.

All told, the cyclicals
had a good day, led by the Forest Products index, which is the
(
$FPP.X |
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at +3.1%. The saber rattling kept the drillers going with the
(
$OSX.X |
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+3.8% with more terrorist warnings by the FBI this morning.

As you know, the red
alert always goes on with rising price and significantly lower NYSE volume in
only the second day of a short-term oversold bounce. The 60-minute trend is
clearly up for the major indices, and the SPX has rallied to the .618
retracement zone to the 1130.21 high of Jan. 31, which is 1110.18. The SPX
closed at 1111.94. The .707 level is 1114.84, and the .786 is 1119. Be alert for
any reversals in the zone we’re in now up to 1119.

Stocks
Today

Many of the semis closed
in the top of the range, but the volume was not above average. Be careful if you
take continuation entries today in the semis on first attempts above the
previous day’s high. Focus stocks are
(
BRKS |
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(
MXIM |
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(
KLAC |
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PowerRating),
just in case they want to run it to new 52-week highs.

Also,
(
TSG |
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PowerRating),
(
IGT |
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PowerRating),
(
JNY |
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(
COST |
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(
AZO |
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(
STJ |
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PowerRating) and
(
SLB |
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PowerRating) and
(
BJS |
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PowerRating) if they come back for the energies.

Also,
(
SEBL |
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PowerRating),
(
EMLX |
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PowerRating),
(
INVN |
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PowerRating),
(
BBBY |
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PowerRating),
(
FITB |
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PowerRating),
(
FRX |
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PowerRating),
(
PCAR |
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PowerRating) and
(
CTAS |
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PowerRating).

On the shortside, if they
turn red,
(
EBAY |
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PowerRating),
(
RATL |
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PowerRating) and
(
VRSN |
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News |
PowerRating). 

Have a good trading day.

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

Five-minute chart of
Monday’s NYSE TICKS