Tentative Week

  • September 9, 2002
  • Kevin Haggerty

It was
an alternating week for the major indices, with
lots of media hype on economic, corporate and war news. For example, last week
the Dow went -355 points, +117, -141, and Friday’s flip-flop at +144 points all
on the week’s lowest NYSE volume of 1.2 billion, which was 15% below average, a
volume ratio of 67, and breadth very positive at +1418. 

Buy programs are obvious
accelerators of any so-called positive economic news and the oversold first
three days of last week. Why does CNBC say the employment number was bullish
down to 5.7% when private sector job increase was negative and it was the
government increase of airport security workers that caused the reduction to
5.7%? Go figure. It didn’t stop the futures from accelerating everybody. 

I expect the futures to
be the dominant force this week, keeping the beach ball moving as we enter the
Sept. 11 period. With the Iraq war hype building, the recent low for the US
dollar of 104.17 must be watched closely, as breaking that could be a catalyst
for lower lows on the equity indices into the next major reversal zone of 9/21,
+/- a few days. 

In the sectors, the semis
at +4.8% and the biotechs at +3.3% continue to be daytrader friendly, while the
OSX, +3.2% and RLX, +3.1%, perked up. Based on last week’s market action, I
don’t expect the .50 retracement to the July low of 870 to hold up, with last
week’s SPX low being 870.50. I look for this break to happen over the next two
weeks. Semis and biotechs remain key trader focus. The
(
SMH |
Quote |
Chart |
News |
PowerRating)s bounced nicely
off the new 22 low on Thursday to hit an intraday high Friday of 23.75 for a
quick 8.0% pop. Thank you, short covering. And also the Lehman analyst
Niles. 

The problem with the SMHs
was that Thursday’s close was in the bottom 25% of the range at 22.38, then
gapped open to 23.38 on Friday, as Lehman’s analyst Niles took out his positive
dueling sword. The analysts coverage in total and the positive/negative hype for
the seminars over the past three months has been nothing less than comical. They
basically have no handle on it whatsoever. 

This week, I would also
focus both ways on some of the oil service stocks like
(
BJS |
Quote |
Chart |
News |
PowerRating),
(
BHI |
Quote |
Chart |
News |
PowerRating),
(
CAM |
Quote |
Chart |
News |
PowerRating),
(
WFT |
Quote |
Chart |
News |
PowerRating),
(
SII |
Quote |
Chart |
News |
PowerRating) and
(
SLB |
Quote |
Chart |
News |
PowerRating). There should be energy volatility
this week setting up some decent intraday trades. You might also watch some
retail stocks like
(
HD |
Quote |
Chart |
News |
PowerRating),
(
WMT |
Quote |
Chart |
News |
PowerRating),
(
KSS |
Quote |
Chart |
News |
PowerRating) and
(
LOW |
Quote |
Chart |
News |
PowerRating) to see if the
flag breakouts can carry a little. 

With the expected program
volatility, the index proxies are still a better two-way intraday trading
vehicle, in addition to some of the liquid HOLDRs, like the SMHs and BBHs. With
the tech selloff, the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s have retraced more than .786 of the 21.30 July
low, hitting a 21.93 intraday low on Friday that wouldn’t normally happen if the
low was in place preceding a strong bull market. Looks like it needs more time
and price to me.

Have a good trading day.

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

Five-minute chart of
Friday’s NYSE TICKS