Slim Jim Breakouts Galore — Did You Participate?

July 13, 2004
Kevin Haggerty

What Monday’s Action Tells
You

Another brokerage firm semiconductor
downgrade
yesterday provided some early opportunity for traders, but it was slow going
as
price rebounded some, then went sideways until the program lights lit up the
board at 2:00 p.m. ET, and it was Slim Jim breakouts galore. The downgrade,
which, by the way, is no surprise to the Generals, provided the early
emotion as
the major index prices traded down to their intraday lows in the 10:30 a.m.
time
period.

NYSE volume would not have surpassed one
billion
shares without the program activity starting at 2:00 p.m. and still managed
only
1.12 billion shares for the day. The volume ratio was 48, which is also the
4
MA. That is an improvement from the 35 4 MA on Thursday when the 5 RSI was
20
and the SPX closed at 1109.10, which was the high end of the short-term
oversold
condition zone. Breadth was +439 and the 4 MA now +279. The 5 RSI is up to
35.

In the sectors, it was all about the semis as
the
(
SMH |
Quote |
Chart |
News |
PowerRating) finished at 34.67, -2.0%, but was 34.10 on the 10:05 a.m.
bar, -3.6%
from the previous 35.37 close. Sequence traders celebrated as the -2.0
volatility band was 34.25, and price was also out to the -3.0 standard
deviation
band based on a specific standard deviation channel period that was covered
in
the seminar. What means bad to the TV media is most often good for the
trader.

For Active
Traders

The SMH Trap Door ran to 34.52, then retraced
down to 34.15 before the afternoon programs carried the SMH to a 34.73
intraday
high, closing at 34.67. The reversal of this -2.0 volatility band at 34.25
was
the first opportunity, and the Slim Jim breakout between 34.34 – 34.20 was
the
second, as it ran to 34.73. The SPY, DIA and QQQ were not as discounted as
the
SMH, but obviously all had good Slim Jim breakouts, with, for example, the
DIA
breaking above 102.10 to 102.79.

Today’s
Action

In yesterday’s commentary, I said the better
scenario was early red this week going into the upward time bias of 07/14 –
07/17, so Monday was a good start, especially for the QQQs which held its
200-day EMA of 35.24 all day and finally trading up to 35.70 and closing at
35.60. It remains a daytrading only zone if the SMHs still remain above the
price action zones outlined in the 07/18 commentary.

I don’t mention longer-term positions much
because you are well aware of this corner’s long synthetic straddle play
which
are doing quite well now with this current move and the increase in implied
volatility. I have prodded you many times into thinking about how you are
handling your long-term index proxy holdings, especially into this much
higher
risk period with the election, etc. I told you that this corner had taken
advantage of the implied volatility drop to hedge with index puts. The AIV
for
the QQQs had declined to below 17% on 06/25, which was the 52-week low, and
that
was surprising to me with the ever-increasing terrorist threat. The QQQ AIV
was
up to 21.6 as of yesterday.

Have a good trading day,

Kevin Haggerty

Slim Jim Breakouts Galore — Did You Participate?

BUY THE FEAR, SELL THE GREED

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