The Generals’ Ball

March 5, 2001
Kevin Haggerty

On
Saturday, the TV media told us
that the Northeast was getting the biggest snowstorm in 50 years, starting
Sunday afternoon and ending Tuesday night. Crowd psychology being what it is,
everyone ran to the stores and cleaned the shelves. Sunday morning, the forecast
changed to 6-12 inches mixed with rain. It
sounds like the day-to-day TV hype on stocks and economics. Nevertheless, I am
in here on Sunday doing my thing just in case there is a negative surprise on
Monday.

Framing the 1220 intraday
low to 1251 high, we get intraday alert levels at 1232 and 1227 for Monday.
Also, it is significant to note that the .618 level from the October 1998 low to
the March 1553 high is 1208. You should also be aware that the last rally leg
went from 1254 to 1383, or +129 points. A
Fib extension ofÂ 1.27 x 129 points takes you down to 1219.17 vs. Friday’s
intraday low of 1219.74. Coincidence? Maybe. Does it happen often? You betcha!Â

Once again, you had a key
alert zone both long-term and daily, in addition to your Volatility Bands and a
reversal intraday pattern. The
S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) is in an obvious oversold condition, along with the NDX,
so we are on a Generals Watch. Regardless
of the market’s trend, daytraders and short-term traders can play both long and
short. There is more risk in not being in when you have the potential of, say, a
20%-25% rally in the NDX, vs. taking maybe a 5% stop-loss objective and the
trade is in the key alert zone.Â Â

If you want your emotions
to be confirmed by the news, the trade is over. That is the benefit of small
money vs. the Generals that need more time to get in and out. You
know that we are oversold, and you also know that both the SPX and NDX have hit
key longer-term RT levels. The
sequence of lower highs and lows started with, for example, the 1530 high in the
SPX.

Follow along with me in the
sequence from 1530 which was the retracement back to the March 1553 all-time
high.

It goes as follows: From
1530 down to 1306 up to 1438, which was a retracement back to the 200-day EMA,
down to 1295, then up to 1389 which was a retracement back to the 50-day EMA,
down to 1254, up to 1383 which was a retracement back to the 200-day moving
average, then down to 1215 and closing Friday at 1234. In
percentage terms, it went: -14.6%, +10.1%, -12.8%, +7.2%, -9.7%, +10.3%,
-12.1%.Â

If you count from the most
recent 1215 low to the 1251 Friday intraday high, that is a +3% rally so far.
We’ve got room. The highest
probability is up for the short-term trader from this key alert zone and
oversold condition. If not, it’s tight stops and out or no entry, no loss.
The Generals and other large money
managers are going to want, at a minimum, for the 2087 NDX low and the 1254 SPX
low to be reversed before increasing any exposure of any consequence.

The NDX had a great fear
opening on Friday at 1886, down 4.2% from Thursday’s 1968 close. There were
Volatility Bands and Trap Doors galore, and then you got first consolidation
breakouts to new intraday highs in stocks like
(
NVLS |
Quote |
Chart |
News |
PowerRating),
(
KLAC |
Quote |
Chart |
News |
PowerRating) and
(
AMAT |
Quote |
Chart |
News |
PowerRating).
The breakouts put those stocks above both
their open and previous close, which usually leads to stronger moves. Save the
five-minute charts for those stocks. It’s a lesson.
(
CEFT |
Quote |
Chart |
News |
PowerRating)
gave us a nice move, breaking out of a narrow-range Dynamite Triangle which
followed two wide-range-bar upthrust moves and then hit a new all-time high. I
call those Roofers. Save the CEFT daily and weekly charts. It’s another lesson.

FYI, the intraday low on
Friday for the NDX was 1866 which is the exact .786 retracement number from the
4816 high and October 1998 low. Bizarre?
Maybe, but you are leaving lots of money on the table by not incorporating the
key alert zones into your trading plan. Emotional markets are excellent
daytrading markets as the travel range expands, so stay on top of your game and
prepare each day. Let everyone else debate the overall market. You just trade it
when it’s there, as a daytrader or short-term trader.Â

(March
Futures)

Fair Value

Buy

Sell

2.15

.3.45Â

Â .45Â

Pattern
Setups

In
the Chosen Ones, keep an eye on
(
VRSN |
Quote |
Chart |
News |
PowerRating) (it’s had eight days of narrow range
and looks like it’s trying to put in a little bit of a bottom — it’s certainly
not a position trade but it’s one that you want right on your intraday charts
for a possible entry).

Have a good trading
day.

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The Generals’ Ball

BUY THE FEAR, SELL THE GREED

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