Thank You, Globex

March 15, 2001
Kevin Haggerty

I was a
bit disappointed when walking into the office this
morning and actually seeing some green, with the S&Ps up 8 points and the
NDX futures +44. Yesterday was such a great day from the long side during the
first hour of trading but as we know, it’s a long walk from 6 a.m. to 9:30 a.m.
and the New York opening.

It all started yesterday at
1 a.m. in the Globex futures market, not on the stock trading desks of the
Generals where it should start in the real world. The S&Ps broke out of a
Slim Jim at 1 a.m., along with the Nasdaq futures, from a basic 1,2,3 top, and
fell straight down as they both ended limits down and New York had to start with
the S&Ps down 32 points and Nasdaq minus 65.

Add to that the marking
down process in Instinet by the market makers, which leads to more emotional
selling by the retail because the TV is hyping it, thus creating more panic. Of
course no one mentions the nature of the futures selling overnight, let alone
the Mickey Mouse volume with zero liquidity.

The Generals hadn’t even
walked into their office and the buy side traders didn’t know whether they had a
balance of blue tickets for buys or red tickets for sells. Redemptions certainly
are a factor, especially in the OTC funds or other growth funds sinking with
still overweighted Tech portfolios because, like many traders, they don’t push
the ejection button soon enough, either. Many
mutual funds have bank lines of credit now to meet redemptions, so they are not
forced to sell stock immediately like they have in the past. This is for the
largest funds but probably not for many of the smaller ones, so it’s tough to
gauge the overall effect of redemptions.

The SPX traded down to
1162, gave you a Trap Door setup off the narrow-range bar and rallied +2.3% by
10:45 a.m. The SPX had excellent convergence as its 2.0 Volatility Band was 1166
and the longer-term .618 retracement is 1164. It doesn’t get any better than
that for a daytrader, whether it be stocks or futures.

Yesterday’s JNPR game
started with a nice gap-down opening to 54 7/8 from the previous close of 58.75.
It traded to a 54 low on the first bar which was the breakout spot from the
previous day. You got an Opening Reversal (O.R.) on the second bar, and JNPR
never looked back until after it hit its intraday high of 62.75 by — you
guessed it — 10.45 a.m. I should note that the pullback held at the .618
retracement level around 57. It’s obviously a focus stock for you today.Â

Five-minute chart of
Juniper Networks
(
JNPR |
Quote |
Chart |
News |
PowerRating)

with 8-period EMA, 20-period
EMA, 60-period EMA, and 260-period
EMAs

1.
Opens at 54.875 vs. previous 58.75 close.

2. Hits 54 low on first bar and holds minor support.

3. Opening Reversal (OR) above 54.875 and stock runs to 62.75
high, before falling off.

I also included a chart of
(
CMVT |
Quote |
Chart |
News |
PowerRating) which supposedly had OK earnings but warned. Haven’t they all? In
the corporate world, it’s called “cover your backside.” CMVT opened
down 8.1% at 64.31, traded to its 62.68 low by the third bar vs. the 2.0
Volatility Band of 62.20, then gave you the familiar Opening Reversal and traded
right to 66.56. It then pulled back to 64, went sideways, but broke out of a
65.5-64.5 20-bar range at 3:30 p.m., and ran to 69 1/16 by 3:30 p.m. (I did not
show you that part of the chart.)

Five-minute chart of
Comverse Technology
(
CMVT |
Quote |
Chart |
News |
PowerRating)

with 8-period EMA, 20-period
EMA, 60-period EMA, and 260-period
EMAs

1.
Previous close 70.

2. Opens 64.31, then trades down to 62.68 by third bar.

3. Opening Reversal (OR) entry above open and high of first bar.

4. Runs 2.06 points to 66.56 before fading.

5. The 2.0 Volatility
Band was 62.20 vs. the 62.68 low. It reversed the 64.31 open
on the fourth bar.

Within all that crowd
psychology and chaos yesterday, the SPX traded very geometrically. There were
intraday Fib retracements and extensions, all with reversal entry patterns at
those key points, along with a second short entry from a 1,2,3 pattern below
1176 when the SPX traded down to its intraday low of 1155.35 before reversing
from that extension low with pattern entry.

If you had attended my
seminar in Naples, Fla., I would hope you caught the sequences yesterday.

(June
Futures)

Fair Value

Buy

Sell

12.65

.14.00Â

Â 11.00Â

Pattern
Setups

The Semis once again showed
strong relative strength and were the first to turn green. The buyers still
returned on weakness. Until that changes, you must be there.

FYI:
Who’s left? The buy-and-holders or the daytraders that are flat at night?

Have
a good trading day.

Thank You, Globex

BUY THE FEAR, SELL THE GREED

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