Wait To Make Your Play
Yesterday was another light day, with only 645 million shares traded and only 12,724 blocks of 10,000 shares or more. Breadth was negative, and the up-down volume ratio was negative 2-to-1 the entire day.
The S&P 500 closed at 1407.65, which is where it broke out of consolidation–not surprising, with all the big techs reporting earnings and Greenspan speaking on Thursday. At 8:45 AM ET yesterday, the S&P futures were up 3.5 points, bonds were up 12 ticks and all four NASDAQ generals were green. But the market rallied only until 9:45 AM, at which point it faded the remainder of the day with no real contra rally. So much for the early hype.
We’re obviously getting some profit-taking after the S&P 500’s breakout to new highs, but we’re also experiencing increased program trading, and many intra-day trends are aborting early. This, along with the low VIX reading, could mean the market will make a stronger directional move out of this consolidation area (at least in the case of the Dow).
Around 8:30 AM, the S&P futures are down six points and the bonds are off 15 ticks. Of course, we’ve seen this reaction in the morning many times before. An overreaction usually results: a gap opening that allows you to play many snap-back moves. Right now, there’s a tremendous earnings season in swing, and the pre-Greenspan speculation is in play. The best thing to do is to sit back and watch how the news is perceived and see where the money goes. Stay with your five-minute charts during the day and keep looking for those consolidations.
Target Stocks Of The Day  Keep an eye on Minnesota Mining [MMM>MMM], Chevron [CHV>CHV], Rowan [RDC>RDC], Echostar Communications [DISH>DISH], Corning [GLW>GLW], MCI Worldcom [WCOM>WCOM] on a consolidation breakout right at its 50-day exponential moving average (EMA), Check Point Software [CHKP>CHKP] and Nokia [NOK>NOK].
| Program Trading Numbers | ||
| Buy | Sell | Fair Value |
| 11.55 | 7.60 | 9.60 |
Remember, stay away from the opening. Let the first half hour play itself out, then try to enter on a setup.
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.