Take Something Off The Table

March 26, 2001
Kevin Haggerty

The
reflex rally for the S&P 500
(
SPX |
Quote |
Chart |
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PowerRating) from last Thursday’s low of 1081 to Friday’s 1142 high is +5.6%. It
closed at 1139.82 or +2% on the day. The declining 10-day EMA is 1153 and 20-day
EMA is 1186. So far, we’ve had a wide-range-bar close in the top of the range
last Thursday, and a change in the direction bar Friday, which reversed two
closes and one high.Â

It has yet to close above
any of its declining EMAs, which means, “Don’t get too excited from a
position standpoint yet.” When you finally get that higher low and then a
higher high, you then have grounds for a valid position decision for taking
entry in the SPYs or S&P 500 index funds. Sectors are a different decision,
as I pointed out on Friday by giving you examples of the contra moves we’ve had
in the XLEs, XLFs, DRG and the XLBs.

The Nasdaq 100
(
NDX |
Quote |
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PowerRating)
had a much more volatile two-day move as you would expect, running from its
intraday low of 1585 to Friday’s high of 1755 on the 9:35 a.m. bar. That was a
+10.7% frenzy. The index fell off
to close at 1705, +3 points above Friday afternoon’s last rush and close. The
Semis continued their lead, with the SOX closing at 642.09, +2.5% on the day.

This is continuation for
most all of the Semis, not a bottom. While
they scare you to death about the Nasdaq Composite, etc., stocks like AMD are
+117% off its 12/21 RST bottom, MU is +74% off the bottom and LRCX is +132% off
its December RST bottom, just to name a few. It all depends which game you are
watching, unless you are tied up in knots talking about the major averages.

Friday’s volume expanded to
1.4 billion shares, a volume ratio of 78, with over 1 billion of up volume and
advancers over decliners by +935. Talk about flip flops and crowd psychology!
You can certainly see that the portfolio managers put their gear on the same as
you retail.

(June
Futures)

Fair Value

Buy

Sell

9.75

.11.45Â

Â 7.90Â

Pattern
Setups

If we get some continuation
from the Techs, look at the XLKs ready to break out of a 10-bar range and above
their 20-day EMA. Also look for continuation entries in the BBHs and PPHs, both
of which could give you some reflex rally.

Also
check the Semis for closing-range setups and you will find some good ones like
NVDA and KLAC. It’s great they popped again, but it doesn’t mean you can’t play
them both ways when they get extended either way. If
this is the next stage of the Semi move, the Generals will be there to buy the
pullbacks.