Thank You, Proxies

May 14, 2002
Kevin Haggerty

Yesterday
was another bonus day for daytraders, as
you had Trap Door entries in both the
(
DIA |
Quote |
Chart |
News |
PowerRating)s and
(
SPY |
Quote |
Chart |
News |
PowerRating)s without any
threat of a stop right into the close. The signal bar for both proxies was an
inside bar, and then entry was on the fifth bar, which was above 106 on the SPYs
and above 99.53 for the DIAs. The SPYs traded to an intraday high of 107.95,
closing at 107.87, while the DIAs traded to an intraday high of 101.25, closing
there. These are all on the five-minute charts. The
NDX gave you entry on the fifth bar from a defined Flip Top pattern, which was
also an opening reversal. Entry was above 1201, trading to an intraday high of
1244, closing at 1241.54.

The
(
SMH |
Quote |
Chart |
News |
PowerRating)s once again
led the pack, giving us a Flip Top entry above 39.50 on the fifth bar, then
trading up to an intraday high of 41.05, closing at 40.97. The semis have been
outstanding for us, with a +15.3% run from the .618 retracement zone in two
days, and then an excellent trade yesterday. Our shortside plays have come in
as expected at an inflection point. The 42 top of that +15.3% run was right at
the 200-day SMA, which is 42.28, with the 50-day EMA at 43, and the 200-day
EMA up at 44.74. Yesterday’s close was right at the .38 retracement to the last
swing point high of 48.10, while the .50 retracement is the same as the 200-day
SMA, and the .618 is approximately 43.75. The .786 retracement to 48.10 is
45.60.

The initial semi focus at
the .618 retracement zone of 36.05, in addition to the oversold condition of the
Nasdaq and the semis, was a no-brainer if you are a sequence trader and trade
the market both ways. By framing what you intend to trade ahead of time, you can
let price come to you and don’t chase price by reacting to the moment changes in
behavior, which is just guessing. I framed the SMHs, now you do it with what
you’re trading. When the SMHs get to various inflection points if the rally
continues, then you decide whether you take any intraday short setups if you get
them at the inflection point levels, which you have outlined in advance.

Key sectors yesterday
were the semis, +5.9%, and software, +4.7%.Â

Stocks
Today

I would expect some good
travel range through Friday, which is also option expiration.

At 7:45 ET this morning,
we have the S&Ps +6, Nasdaq +18 and the Dow futures +45, all ahead of the
retail sales figure at 8:30 for all that means. Ninety percent of all early
futures reactions are reversed at least once before any decent trend takes hold
anyway, so you just look for that pattern and take it.

Have a good trading day.

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

Five-minute chart of
Monday’s NYSE TICKS

Thank You, Proxies

BUY THE FEAR, SELL THE GREED

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