State Of What?

January 30, 2002
Kevin Haggerty

Yesterday’s
10 point rally from the .618
retracement zone on the hourly chart ended by 10:00 a.m. at an intraday high of
1137.47 for another failure test to get past the 1139.50 neck. The opening
reversal below 1133.27 and below the previous close of 1133.06 began the knife
down. The next stop on your weekly preparation framework was the 112 low on the
(
SPY |
Quote |
Chart |
News |
PowerRating)s, which (I mentioned yesterday)
is an air pocket below 112 out of the 114-112 box. The 1.27 Fib extension of the
last leg up to 1139.50 on the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) was 1111.47. The SPYs held
this zone for just eight bars before a knife down below 112 that took the SPYs
to a 110.05 intraday low. The SPX paused just 2 points at the 1.618 Fib
extension hourly chart at 1103.79. The break below 112 dominated. It is a
two-and-a-half-month low, with the
.38 retracement to the 945 September low at 1088 on the SPX cash.

The corporate news has
come to us in bunches, with K-Mart
(
KM |
Quote |
Chart |
News |
PowerRating), Enron, Global Crossing
(
GX |
Quote |
Chart |
News |
PowerRating) and
Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating). There are probably other corporate surprises out there close to
the edge, but that has always been the case. The Washington lobby by
corporations, accounting firms and lawyers is just too strong, or I should say
they pay too much to the politicians who refuse to make the necessary changes to
corporate reporting. A first-year credit analyst could lay it out, i.e.,
everything must be reported on the financial statement, such as off-balance
sheet financing, get rid of pro forma earnings, etc. They all know what it
should be, but won’t do it. Instead we will hear a lot of rhetoric and
politicians scrambling about, protecting us, we investors, but the bottom line
will be nada. I sincerely hope I am wrong.

Every market makes
someone happy, in this case, it is those of you that hedged up holdings into the
resistance preparing for a retest of the September lows. Also happy are those of
you who put on some delta neutral positions when volatility dropped to the low
end of the matrix in various stocks and indices. Also happy are those traders
who just sold long positions — or got short into the often-spoken-about resistance
in declining longer-term moving averages — to the “trend is your
friend” gang and the momentum players.Â

The NDX, which has
already hit the .38 retracement to the September low on Jan. 22 at 1501, closed
at 1519.33. There is an air pocket below 1501, and the retracement to the .618
zone takes the NDX to about the 1330 level. Trading the QQQs, you see the .38
retracement at 37.11, the .50 retracement at 35.22, and the .618 at 33.33. There
is some decent reflex support at the 35 zone.Â

The speech has been
heard, and I didn’t catch it, but as of 7:15 a.m. this morning, I don’t see any
“win one for the Gipper” green in the futures. I would love to see an
early emotional down to set up some good Trap Door/Volatility Band plays. There
will continue to be some good reflex action both ways with the retest bias still
down.

Stocks
Today

Have a good trading day.

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

Five-minute chart of
Tuesday’s NYSE TICKS

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