The Generals Haven’t Shown Up

August 14, 2001
Kevin Haggerty

As
daytraders we had an excellent day, helped
in great part by the four major buy programs that started at 1:00 p.m. ET. The
last one started on the 2:40 p.m. bar at +172 New York Stock Exchange ticks and
went to +1044 ticks on the 2:55 p.m. bar, then quickly dropped to -90 at 3:30
p.m. These programs normally last from 10 to 15 minutes each. Watch the spread
between the S&P futures and the cash index to determine what spreads are
live that day.

We had some excellent
trades in most of our semis yesterday, led by
(
NVDA |
Quote |
Chart |
News |
PowerRating) and
(
ISIL |
Quote |
Chart |
News |
PowerRating) which
actually gave us two solid moves. The first was a trade-through entry above the
previous day’s high and the second came after a .618 intraday retracement above
both the open and previous close, and then a 2.5 point run to close at 42.5. For
learning purposes, save the daily and intraday charts to see the initial daily
chart setup and then the intraday 5-minute charts to follow the entries and
pullback trades.

After the six-day pullback
in both theÂ Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) and
S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) to a short-term oversold position, I said that the bias
was up into expiration. The Semis like
(
KLAC |
Quote |
Chart |
News |
PowerRating) (which has bounced 10.2%
from Thursday’s low at the 200-day EMA level) have given us a quick upside
reflex, as have the Biotechs, with the BBHs advancing 8.7% in three days.
The Cyclicals chipped in with an up day,
while the XAU (the gold index) is up 6.3% the last three days.Â

Having said that, the
market action is not good when you get rising prices and declining volume with a
narrowing of range — and that’s exactly what we’ve had in the last few days.
Yesterday the NYSE volume was only 840 million, dropping to just 75% of its
average volume. The volume ratio was neutral at 50 and breadth positive by +229.
The SPX was flat at +0.1%. The Nasdaq
closed +1.3% on the day, with volume dropping to just 1.1 billion, less than 65%
of its average volume, the lightest of the past five days. The volume ratio was
good at 71 and the breadth positive by +352. The
NDX advanced +2.2%.Â

The Generals have not put
their money up to buy this dip with any aggressiveness from the lower levels,
which is not good. The daytrader is happy because you only need the rising
prices for the day, but unhedged position traders are in very fragile territory
right here (which, in my opinion, you shouldn’t be). If
you want to take a long rally bias, do it with a defined risk options strategy.
As a daytrader you should care less and play it whichever way it sets up, going
out flat at night.

(September
Futures)

Fair Value

Buy

Sell

3.15

Â
4.20Â Â

Â 2.10Â Â

Stocks
Today

The Generals haven’t shown
up yet, so the program traders are in control until they do. Don’t hesitate to
take half profits on a position and quickly move to breakeven on the balance. Be
alert to trade any contra moves — which are frequent when the program traders
are active.

In the semis, we’ve had
rising prices and declining volume but we did get top-of-the-range closes so we
must be alert for continuation moves if the Generals show up with any money
today. I advise you to take second
entry longs above the previous night’s close, or pullback setups.

Have a good trading day.

Five-minute chart of
Monday’s S&P 500 with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Monday’s NYSE TICKS

Do you have a follow-up question about something in this column or other questions about trading stocks, futures, options or funds? Let our expert contributors provide answers in the TradingMarkets Trading Advisor! E-mail your question to questions@tradingmarkets.com.
For the latest answers to subscriber questions, check out the Q&A section, linked at the bottom-right section of the TradingMarkets.com home page.

The Generals Haven’t Shown Up

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources