Travel Range

June 25, 2002
Kevin Haggerty

Yesterday’s
story was about travel range, as
the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) went -170 points, +286, -134 and +46 to close up 28
points, or +0.3% on the day. However, the travel range was a bizarre 636 points,
or 6.9% total travel range. I’m sure there was some short covering and positive
there were programs in good size. The
(
$DJX.X |
Quote |
Chart |
News |
PowerRating) closed at 92.54 on Friday,
June 21, traded down to an intraday low of 90.84 yesterday on the 12:50 p.m.
bar, which was an outside-bar top-of-the-range close. This reversal bar pattern
was right at the 1.5 volatility band, which was 90.75.

The ensuing rally carried
the DJX to 93.70, which was the 260 EMA on your five-minute chart. A
narrow-range reversal bar gave way to a move down to 92.36 before closing at
92.82 vs. the 92.54 close on Friday. You got to trade the emotion from a
high-probability volatility band with an entry pattern, and that’s what you
should be doing all the time. Traders of all time periods must be able to trade
the countermoves in a trend, as well as the obvious continuation trade.

The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
also bounced off its 1.5 volatility band, which was 970 vs. the intraday low of
971. The SPX rallied 32 points to 1002 before falling off to close almost
unchanged at 992.57, or +0.3%.

NYSE volume was 1.6
billion, about 20% above average, with a volume ratio of 46. The Nasdaq traded 2
billion shares and finished +1.3% on the day, as the techs led. The
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) bounced +4.0% from its -16% four-day trip. When I point out the
volatility band trades in the major indices and HOLDRs, there are numerous
stocks at the same volatility bands or else you wouldn’t see the index there.
Those of you that have the volatility band service see this in the stocks, and
the rest of you just see the index levels.

We have four days left
for the June report card, so you can understand why shorts would be anxious in
front of that, especially when they got this covering opportunity at new lows on
the SPX, etc. I read nothing into yesterday, other than short covering in
addition to all of the rebalancing going on into the six-month report card.

Yesterday’s afternoon
reversal was even more interesting, as it was right on the intraday reversal
times for the SPX cash index, which was 12:52 p.m., and the rally ended on the
2:35 p.m. bar vs. the 2:37 reversal time. These coincidences never cease to
amaze me, and I know for a fact the Program Gang is right on the case.Â

Stocks
Today

Have a good trading day.

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

Five-minute chart of
Monday’s NYSE TICKS

Travel Range

BUY THE FEAR, SELL THE GREED

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