Thin

November 19, 2001
Kevin Haggerty

Since
last Wednesday, the major indexes have
drifted lower with a last-hour option-expiration mark-up into the close on
Friday. Three days of choppy trading which forces traders into a scalping mode
with early profits and tight stops, both long and short. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
traded down from Wednesday’s intraday high of 1148 to an 1130 low on Friday
afternoon before closing at 1138.65. There is a strong resistance zone from
1150-1200, and it is a good risk/reward level to initiate a short trade in the
index proxy.

The NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating)
hit a 1605 high on Thursday, then down to a 1567 intraday low on Friday, closing
at 1582. The Dow was the best of the three, as the
(
DIA |
Quote |
Chart |
News |
PowerRating)s hit a three-day
high on Friday at 99.34, closing at 98.87. The oil service stocks
(
$OSX.X |
Quote |
Chart |
News |
PowerRating),
down 10%-15% on the OPEC flap in two days to the extreme volatility band levels,
had a good reflex rally on Friday with significant volume. It wasn’t short
covering because there was overt news and there was no time to get short. They
had top-of-the-range closes on Friday, so that puts them on alert today for us
to see what the Generals are really thinking.

This week we have the
much-publicized statistic of how often the market rises pre-Thanksgiving, but
the reality is the reduction in liquidity and the futures action controls the
market this week. This will provide opportunity, but your entries have to be
precise and your trigger finger fast on your outs. My suggestion is to focus on
the semis
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) and biotechs
(
$BTK.X |
Quote |
Chart |
News |
PowerRating) for holiday mark-ups. The
next position trade may be on the short side into resistance for the index
proxies.

For the next bull market,
I look to techs, financial services, biotechs and healthcare, along with the
big-cap multi-national stocks. With all of the HOLDRs and sector proxies now
outstanding, you can put together your own mutual fund to reflect the sectors
you expect to lead.

Stocks
Today

Have a good trading day.

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

Five-minute chart of
Friday’s NYSE TICKS

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Thin

BUY THE FEAR, SELL THE GREED

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