Spin Doctoring
Friday was another wide-range day in the S&P 500–34.78 points with an initial large down gap opening on the NYSE. There was a big sell-off in the bond market because of the CPI numbers, which probably means we’ll hear some positive jawboning this week on all fronts.
I though it was very interesting that at approximately 10:20 a.m. on Friday, the S&P 500 futures were limit down (-30) and at 10:25 a.m. the White House started talking on Dow Jones news about how low inflation is. They need this market up; they’ll pull out all the stops to prevent a meltdown.
Look for positive news. As John Dessauer pointed out recently in his excellent publication, higher U.S. interest rates are one major reason the dollar has been so strong. U.S. rates are much higher than European and Asian rates. If the Fed allows rates to move up too much, the dollar will continue its strong rise, creating major problems for U.S. businesses. Washington will try to prevent this from happening.
If they take the market down early today (the S&P futures are trading down 6 points around 8:25 a.m. ET with bonds off two ticks) intraday consolidations at early lows should be your focus. For those of you who have read The TradingMarkets.com Guide to Conquering the Trading Markets, you will definitely find some “trap door” patterns as the specialists take out “at-the-market held sellers” on and just after the opening.
If a continuation entry based on Friday’s close gaps down too far from your proposed entry point because it has too much of its average daily range to make up on the upside prior to your entry point, plan B is to look for a consolidation breakout from the lows on a daily bar or daily bar reversal pattern to enter, like a trap door. If the consolidation pattern sets up and breaks to new lows, you can play it from the short side intraday if you have the execution capabilities.
Target Stocks Of The Day  Despite the hit the averages took on Friday, watch for continuation patterns in Applied Materials [AMAT>AMAT], Sun Microsystems [SUNW>SUNW], Boeing [BA>BA], Autozone [AZO>AZO], Ameritech [AIT>AIT], and Rohm & Haas [ROH>ROH]. A narrow range pattern if they go for the energies is Apache [APA>APA].
Program trading numbers  Buy: 6.40. Sell: 2.35. Fair Value: 4.65.
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.