The Numbers Game

Around 8:25 AM ET, I see the futures are off 2.5 points as everyone waits for the big jobs number (whatever it means– it’s revised constantly). Good or bad, there will be an overreaction, so you must prepare for both sides of the market–either from the lows for the snap-back, or from the highs if it gets too hyped. Either way, there’s opportunity.

Yesterday, the mysterious futures buyers (who we call the “Turk) showed up at 3:45 PM ET. Both the Dow and S&P were up all day while the NDX was under water the entire session, finishing down 44. This continues the erratic trend of techs up one day, down the next, and some of the basics came back after their day off.

Someone other than the institutions is attempting to break the market out of the upside of its range. Volume was again light and breadth only slightly positive, but that didn’t stop the 3:45-4:00 PM mark-up in the averages because of program maneuvers.

At 3:45 PM the Dow was +22, the S&P 500 +1, the NDX -37. More importantly, the up volume was 359 million and the down volume was 262 million. On the bell the scoreboard read Dow +86, S&P 500 +5, NDX -44–but the up volume was 428 million and the down volume was 249 million. We got the upside swing in the Dow and S&P 500 on a net positive up-volume swing of 82 million. Good job, Turk!

The SPDRs did their job, closing above their last six closes–important. They break out of the range above 131, which will give you an opportunity for the trade in the SPDRs today. Then they have to surpass the 50-day exponential moving average of 131.82. I say “have to” only because it’s an objective, and it’s clear sailing above the 50-day.

Key point: Consider a setup like the one in Avon (AVP) the other day. On June 1, AVP set up. On June 2, there was no entry, but on June 3, there was good entry based on the June 1 setup for a gain of 1 3/8 above entry. Moves on delayed entries like this are often stronger moves. When you first get these patterns, save them, an keep looking at them for two or three days.

Target Stocks Of The Day  Stocks that set up nicely (but we need some follow through) are Rockwell [ROK>ROK], Sprint [FON>FON], Limited [LTD>LTD], Electronic Data Systems [EDS>EDS], Johnson & Johnson [JNJ>JNJ], and Comverse Technology [CMVT>CMVT].

Three cyclicals that set up are Alcoa [AA>AA], Allied Signal [ALD>ALD], and Dupont [DD>DD].

Program trading numbers  Buy: 4.00. Sell: 0.80. Fair Value: 2.05.

Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.