Technicals

October 24, 2001
Kevin Haggerty

The
high of the day for both the SPX
(
$SPX.X |
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PowerRating) and NDX
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$NDX.X |
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PowerRating) was
put in on the 10:40 a.m bar. See your five-minute chart. The high bar was a tail
with both the open and close the same at the absolute bottom of the range. For
those of you that are now involved in sequence trading, or are at least aware of
it, you see that the intraday high was right at the 1.618 extension of the first
leg down and also right at the 50-day EMA of 1098.30, which I mentioned as the
hurdle in yesterday’s
text.Â

The SPX was so nice to
you that it gave you a 1 2 3 short entry trading below 1095, which continued
down to 1081.83 before a quick bounce to 1088. The 1 2 3 entry was, of course,
below the eight-period moving average of the lows and it gave you a nice rounded
hook as it made the 3 point. There couldn’t have been more definition for an
entry to a trade. Before I move on, the quick rally off the 1081.83 low was
right on the 1.618 extension of the leg up to the intraday high of 1098.99.
Start your day with the various alert levels and then anticipate the next one as
the intraday action unfolds. Try it. You will profit from it.

The SPX continues in a
nine-bar range right at the .618 retracement to the 1187 high and the 50-day EMA,
which today is 1097.24. I gave you the next confluence yesterday which is at the
1130-1135 levels if the index moves above the current range.

Just like there was no
significant volume or breadth on Monday’s rise in the market, yesterday wasn’t
all that different, except the NYSE volume at 1.3 billion was about 10% above
average. The volume ratio dropped off to 45, while breadth was also neutral at
-68. The SPX and Dow were both off about 0.5%, while the NDX 100 was +0.1%, as
many of the dogs of summer of the past year keep hanging around the green side.
Net, Net it wasn’t that bad a day, and it certainly continues the bias to be
long
(
QQQ |
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PowerRating)s and short
(
DIA |
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PowerRating)s. The leading sector yesterday was the
(
$OSX.X |
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PowerRating),
which gained 1.4%, and we caught some of that move with trade-through entries.

We are in the volatile
“earnings fraud” season, so stay to the technicals and shut the empty
suits off and be flat at day’s end. The state of companies reporting with all of
the managed and pro forma earnings is the biggest perpetuated fraud on investors
I have seen in my years in the business, and the Wall Street analysts go right
along with it. Never mind the equal disclosure company announcements of news,
the SEC should be going after the current accounting practices. It seems these
companies go by the motto “If you can’t earn it, hide it.” I read
where Merrill Lynch
(
MER |
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PowerRating), Goldman Sachs
(
GS |
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PowerRating) and another large Plunge
Protection Team member all showed up at the same 9:45 a.m. hour to buy huge
quantities of futures on one of our recent pre-opening meltdown days. If that’s
going to be the game, then volatility bands will be nothing short of sensational
reward-to-risk as we continue to tiptoe through Afghanistan and our oil
suppliers so as not to ruffle any turbans. Right.

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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Technicals

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