Two In A Row

  • September 6, 2002
  • Kevin Haggerty

The
final scorecard once again was not representative of
the travel range yesterday. NYSE volume was 1.3 billion, just below average, the
volume ratio 25, and breadth -969. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) finished the day at
-1.6%, Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) -1.7%, the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) -3.2%, and the NDX
100
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) -4.1%. 

Opportunity for traders
began after the gap down opening where the SPX traded down to 870.50 from the
previous 893 close by the 10:10 a.m. ET bar, and yet to have a contra rally.
This was a zone of strong confluence, as 870 is the .50 retracement to the 776
July low and it was also the 1.618 Fib extension level of the previous day’s RST
rally from 875.73 to 896.10. The 10:10 a.m. ET bar was the signal bar for
another RST entry above 871.34, which ran 16.6 points from entry to 888 and
17.50 points from the low. 888 was also the .707 retracement to the previous
day’s high of 896.10. 

It didn’t matter whether
you knew what an RST pattern was or not. There was a reversal bar entry at a key
sequence level which you knew in advance. Once the SPX traded below the previous
day’s low of 875.73, you should have been calculating the Fib extension levels
which gave you the match with the 870 .50 retracement level. Remember, in
sequence trading you are always looking at both the current day and
relationships with previous days.

We have my favorite
economic jobs dance this morning at 8:30 a.m., which is always a mysterious
calculation by the Bureau of Labor Statistics, and most often revised. That
doesn’t stop the raid on the futures after the announcement. No one remembers
the numbers the next day, but the initial overreaction, or maybe I should say
manipulation, always sets up some trade for the daytraders. You have your
awareness levels both ways for the major indices, so be alert for setup when
price gets into the zone.

Have a good trading day.

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

Five-minute chart of
Thursday’s NYSE TICKS