The Extreme Games

November 17, 2000
Kevin Haggerty

Naked
position traders are in bunkers right now with
helmets on, taking all of the incoming fire. Daytraders have cramps in their
fingers trying to take advantage of this fantastic volatility if you look at it
from the daytrader’s eyes: Up 10%, down 10% in many of the chosen ones is
currently the norm. There is no liquidity as market makers and specialists get
out of the way and would prefer, with good reason, to just piggyback in the
direction of the customer’s order and go out flat at night. They are not about
to give up the year’s profits over the last couple of months. Net,
Net, it means volatility will continue.

The bogey for the Generals
is the 6.6% on the S&P 500 as of last night. That is the objective so
everyone will say at year’s end it was a tough year, but overall, based on the
past few years’ gains you are still very much ahead of the curve, so give us
more of your money to manage and everything will be okay. The -6.6% that the
S&P 500 is down YTD will be a cinch for the Generals to overcome, but the
Nasdaq’s down -26% YTD will be tougher to reach because of the valuations
that are deemed by many to still be extremely high.

The NDX 100 rallied 14% off
Monday’s 2742.47 low to Wednesday’s 3128.37 high, which was a strong three days’
move. Yesterday it retraced 52% of
that move. The semis, which led the three-day rally gaining 14%, also retraced
40% of that move, ending yesterday down 5.6%. In addition to Florida, we have
option expiration today for a double volatility whammy, not to mention the
drones in the media that are highlighting slow-down stories. What rock have they
been under for the past six to nine months?

Travel range continues to
astound me and it certainly tests whether you can utilize that ejection button
fast enough to control your risk. It is not uncommon to lose 1/2 to 1 point four
times in a row, then make the 8-10 points on one trade. One out of five, but you
still might net 5-6 points. If you
can’t use the ejection button correctly, then you would be better off spending
your money on a mini-vacation until this craziness subsides and we trend again,
either up or down.

But for those of you that
can, there is lots to do. One example of the extreme games is
(
ITWO |
Quote |
Chart |
News |
PowerRating) this
week. From Monday’s low of 112.5, it rallied to 146 3/8 high on Wednesday, which
is just your basic three-day +30% move, and that doesn’t include the travel
range intraday. Yesterday it traded back down to 122 or -17% from the Wednesday
high. That’s four days and a 47% turn, folks, and there are many other similar
examples in the chosen ones.

If you stay all over this
list on an intraday basis, you will get many great daytrading opportunities, but
your mental health will be much better if you are flat at the end of the day. I
will refer to this list as the Daytrader’s Dozen until further notice, so save
it.

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
7.35	8.55	5.90

Pattern
Setups

The first hour continues to
bear fruit regardless of how the day’s main trends go. Yesterday, they took them
down early on big gaps with the familiar retail discount. For example,
(
JNPR |
Quote |
Chart |
News |
PowerRating)
opened at 169 13/16 at 9:30 a.m., down from the previous close of 177.5, traded
down to 167 3/4 second bar, then rallied 7 1/4 points to 175 before trending
down the rest of the day with the major averages. If you looked at Instinet, the
stock was even lower. Volatility
bands, anyone?

The S&P 500 futures
challenged the previous day’s high of 1404, hitting 1403 which then blew down to
take out the prior day’s low. Focus today on the aforementioned Daytrader’s
Dozen. See if you have any pivot points or a closing range to work from, and
take only what they give you with very tight stops. You will catch a ride on a
few of them. Watch that first contra move and any Opening Reversals.

Have a good trading day and stay
alert.

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The Extreme Games

BUY THE FEAR, SELL THE GREED

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