The First Wall

March 28, 2001
Kevin Haggerty

The Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
ran early out of a Flip Top above
1683, right to 1750 by the 10:55 a.m. bar, then backed off, made a Double Top at
1751 on the 12:45 p.m. bar and went sideways for the remainder of the session,
closing at 1735.70, for a net gain of +3.5%.Â

The NDX is in an eight-bar
consolidation that has to clear 1755 to come out and then get past the 20-day
EMA of 1789, before it has a chance to attack the 50-day EMA of 2148. The most
recent three-bar low is 1664.66 and the deep low is 1582.48. So far, four days
and +10.9% for the oversold rally. Thank you, Generals!

The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) put
in another good day, closing at 1182.17, +2.6% on the day. From a daytrader’s
observation it went: Flip Top; First Consolidation Breakout to New Intraday
Highs; and Slim Jim for the last 7 points at about 3:20 p.m. They were all
continuation entries, with nothing resembling a pullback entry all day.

The four-day rally is
+9.4%. The last rally we had of at least 5% was from 1254 on 12/21/00 to 1383 on
1/31/01, which was a +10.4% advance in 27 days. Yesterday’s advance has the SPX
bumping up against its 20-day EMA of 1187, which is a good daytrader’s short
level with stops right above it.

I have included a chart of
the SPX, which points out previous retracements to the 20-day EMA and highlights
the resistance at 1215 which coincides
with the down trendline from the 1383 high. Needless
to say, if this rally from the longer-term retracement zone is to be more than
10%, the 1081 low must hold on a retest and then it can run to the 50-day EMA at
1270, which is also the .618 retracement to the 1383 high.

Daily
Chart of S&P 500

The
rally so far has been pretty good regarding the volume ratio and total amount of
up volume. Yesterday’s rally had volume of just over 1.3 billion, a volume ratio
at 75, with 979 million up and 322 million down, and advancers over decliners by
+830.

There have been
some excellent intraday setups during this rally especially in the Semis.
Yesterday, for example,
(
MU |
Quote |
Chart |
News |
PowerRating) gave you two good plays, both coming around that
200-day EMA pivot. The first was a Flip Top on the 9:45 a.m. bar, which ran
about 2 points before fading into the 3:30 p.m. time frame, and then it gave you
another good entry on a recross of the 200 again into the close of 48.

(June
Futures)

Fair Value

Buy

Sell

9.40

.10.75Â

Â 7.65Â

Pattern
Setups

If the early red holds,
we’ll be looking at pullback levels and closing range patterns for possible long
entry and/or taking continuation
shorts below yesterday’s lows.

In
the Biotechs, which have had a good three-day oversold rally, look to play the
BBHs if they continue.

On the short
side,
(
MERQ |
Quote |
Chart |
News |
PowerRating), early entry is below 49.25 and also the DIAs — early short
entry is below 99.16 and then again below 98.40.

In
the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s early entry is below 43 and again below 42.57.

In
the SPYs, early entry is below 118.04 and then again below 117.30.

Have
a good trading day.

The First Wall

BUY THE FEAR, SELL THE GREED

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