Useful Divergence

• July 16, 2002
• Don Miller

What do you get
when you combine screaming index strength divergence,
a tremendously oversold market with strength
divergences on multiple timeframes, and classic intraday reversal setups? The
reversal of all reversals. 

I’ll let

yesterday’s column and the chart speak for themselves, and while the Dow
plummet did pull the Nasdaq momentarily below hourly support, the three and
13-minute charts provided textbook reentry triggers when the Dow finally
turned. We’re entering Day 6 of Nasdaq/Dow divergence which continues to help
provide a useful Q trading backdrop, and my bias, given the plethora of
indicators, continues to be long in terms of risk/reward as I mentioned
yesterday, which will be subject to change the farther we climb, just as my
short interest declined the more oversold we became.

This morning, the gift gap down and Greenspan-induced sellathon provided the
best entry of the day to double 13- and 60-minute support, with the 13 providing
a nice trailing stop on any remaining shares. Volatility remains high, so adjust
your share size and expectations accordingly.

Tuesday July 16, 2002 
12:00 P.M. ET

Good Trading!

Don Miller