These Two Things Are Not A Good Mix…Here’s What You Do

  • May 16, 2003
  • Kevin Haggerty

There
was a surge in option expiration activity late in the day yesterday,
as total NYSE volume was 1.4 billion, and
at 2:00 p.m. ET, the volume was about 947 million. Both the SPX
(
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and Dow
(
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(
$COMPQ |
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and the NDX 100
(
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and there are nine of them, such as the XLK, XLB, etc. The NYSE volume ratio was
positive at 69, as was breadth at +778.

In the specific sectors,
the brokers, which is the XBD, led at +3.6%, the biotechs +2.1%, and the SOX
+1.9%. Semis and brokers advancing in tandem for any period of time is positive
and a good gauge of institutional perception of where the economy is heading.
They are both at extended level zones now, same as the major indices.

The rising prices for
major index proxies, such as the
(
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(
QQQ |
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by obvious declining volume for the month of May so far. Since the March 31
retracement low, all of the major indices are in rising wedges, with a
significant decrease in daily range, as volatility has narrowed. Rising price,
declining volume and narrowing range is not a good mix for naked longer-term
positions, so be alert and adhere to your trailing stops if you are in a
profitable position that you are keeping on until the market proves you wrong,
which is as it should be.

The Generals are capable
of making another push up to the 3.0 band before a retracement, but there is no
edge on making that bet with new entries right here. Just protect what you have
and stay the ride until price throws you off.

After the two price
thrust days last Friday and this Monday, the indices have consolidated for three
days, as evidenced by the dynamite triangle formed by the Dow, with the last
three days within Monday’s daily range, which was between 8743 and 8569. After
two days of wide-range bars bouncing off the 200-day EMA and now this positive
continuation pattern, you can see how it can easily be resolved by another push
up to the higher levels of previous resistance. The rising wedge Fib extensions
from the retracement leg ending March 31 for the Dow are 8680, 8764, and the
1.618 at 8885. For the SPX, it’s 948, 960 and the 2.618 at 980. The SPX is
obviously ahead of the Dow and why the current Dow consolidation is interesting.

The
(
BBH |
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closing high for this rally at 106.22 and is now looking at our other price
objective, which was 112. Our biotech stocks like
(
GILD |
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(
GENZ |
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(
AMGN |
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(
USAI |
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(
EXPE |
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(
PCAR |
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good daytrading setups that above-the-line stocks normally do.

Have a good trading day
and have a wonderful weekend.

Kevin Haggerty


PS
Spend a full weekend with me June 20-22. 

Click here for details.

 

Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Thursday’s NYSE TICKS