The Day

May 15, 2001
Kevin Haggerty

Another
day of non-commitment in either direction as
total volume declined for the fourth straight day to 849 million with both the
volume ratio and breadth slightly positive. The Energies and Financials made a
green effort and, along with some Medical/Healthcare stocks, are the three
sectors overweighted by the Generals.Â

The sector rotation in this
bear market has been classic and the recovery sectors are now doing their thing.
That is not a subjective opinion, that is just a fact — where the Generals have
put money to work. The exercise to decide whether they’re right or not is
useless to traders because you should be following the Generals’ money flow as
they are the only ones that can sustain any move.

Yesterday was a nothing day
for most, unless you caught any part of the 3:00 p.m. “Flashdance”
rally into the close, as positions were tucked in going into today’s Fed
meeting. There has been no desire by the Generals to extend an overbought
condition in many of the Travel Range and related-type stocks and some have
pulled back to the beginning of interesting levels, especially if we get a quick
decline after the over-hyped event.

If you have a delta neutral
options strategy on, you are all smiles — and could care less which way the
overreaction goes, just as long as there is one. You can bet the trading range
the indexes are currently in will be resolved sooner, rather than later. If
you are a daytrader, you let the Fed have center stage today, then react. If you
are an unhedged position trader with market stocks, then you have your fingers
crossed — the worst-of-all risk/reward scenarios.

Stocks
Today

(June
Futures)

Fair Value

Buy

Sell

3.40

Â 4.70Â

Â 2.10Â

Regardless of what the Fed
does, we still have to go through the drill of checking the daily charts. These
are all long setups on the daily charts so we have them on the Trading Plan in
front of us.

On the short side — if we
get that kind of reaction, you’re probably not going to get a chance to get any
trade-through entries, so the first trade, if we react down in any kind of big
size, is going to be a fading-type trade. If we do get trade-through short
entry, I’d look at the Travel Range stocks from yesterday’s
list that closed in the bottom of their range and also focus on the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s.
There will be very strong market movement both ways.

Have a good trading day.Â

Chart 1. Five-minute chart of
yesterday’s S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) with 8-,
20-, 60-
and 260-period EMAs.

Chart 2. Five-minute
chart of yesterday’s New York Stock Exchange ticks.

Gary
Kaltbaum on TradingMarketsWorld! Gary Kaltbaum will be appearing on the
Intermediate-Term Trading board Thursday, May 17 at 8:00 ET. Be sure to take
this opportunity to chat with and have your questions answered by a leading
intermediate-term trader. Click
here to take your trading to a new dimension.

The Day

BUY THE FEAR, SELL THE GREED

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