Spotlight On The Dow

By not violating the April 30 low of 1314.55 in the S&P 500 cash, closing at the top of its range and over both 10- and 50-day moving averages, yesterday’s action set up a bullish scenario for today (depending on what happens with Greenspan).

By 11:30 a.m. yesterday, the SPDRS had traded down 2 3/8 to 131.84, which was just above the April 30 low 131 1/2. Then they rallied 132 5/8, made a higher bottom at 132, forming a 1-2-3, or W, bottom, and finally rallied again to close at 134 7/8 on both program and real buying.

The semiconductor index turned up first, then drugs; by the end of the day, virtually all the sector indexes had turned up except energy. If they come for them today, the focus will be on some of the key Dow stocks, which is absolutely necessary to propel the averages higher.

Target Stocks Of The Day  Some continuation patterns in the Dow stocks include American Express [AXP>AXP], J.P. Morgan [JPM>JPM], Caterpillar [CAT>CAT] DuPont [DD>DD], International Paper [IP>IP], Hewlett Packard [HWP>HWP], Allied Signal [ALD>ALD] and Citigroup [C>C]. One high-momentum stock outside the Dow that is set up nicely is Ann Taylor Stores [ANN>ANN].

Focus on the Dow issues. Between the programs and people trying to get back into the basic names, these stocks will get marked up if the tape looks right.

Program trading numbers  Buy: 8.26. Sell: 3.62. Fair Value: 5.88.

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.