Waiting For A Sign
Nothing happened yesterday from a directional standpoint in the S&P 500: We still have the same high of 1405.30 and we didn’t trade or close below that day’s low of 1387.09.
The NDX, led, of course, by the techs (especially the semis), closed up 34 while the Dow dropped 60 and the S&P fell 1.5. The bonds reversed during the day and finished plus 27 ticks, but the bank and utility indexes both were negative–not much correlation (a sign of a choppy market). Volume picked up to 827 million shares as both breadth and the volume ratio again were negative.
The best market or index plays yesterday were in the SPDRs (SPY), Diamonds (DIA) and QQQs (QQQ), which all broke out of trading ranges after approximately the first hour of trading. Save your five-minute charts. All three averages were in synch and the move came after a positive divergence on the NYSE ticks vs. the S&P futures. These trading ranges were very positive patterns. If you have live charts you should always have a futures chart with the NYSE ticks below so you can watch for these divergences. It doesn’t require anything complicated to do well.
Despite the choppiness, some stocks had good entry and did well yesterday. Qualcomm set up, but is already up over 10 points this morning because it’s being added to the S&P 500 (it obviously won’t be a name today). But it looks like there’s a little competition brewing between the S&P and Dow. Adding these high-flying names will accelerate the averages in the direction they’re going. Right now the S&P is playing a little catch-up to the Dow as far as percentage move for the year. Take out the stocks the Dow has added and the situation would be reversed. The games they play. . .
Target Stocks Of The Day  Dell [DELL>DELL] has to top the list. Yesterday it broke of a consolidation above its 50- and 200-day moving averages. Any kind of pullback to yesterday’s high would be a good entry point if dynamics pick up. Or, if they decide to jump on it and take it right through the highs–a continuation entry–watch for the second time through. Also keep an eye on Vitesse Semiconductor [VTSS>VTSS], Applied Micro Circuits [AMCC>AMCC], Comverse Technology [CMVT>CMVT], Nextel Communications. [NXTL>NXTL], First Data [FDC>FDC], Sun Microsystems [SUNW>SUNW] and Abercrombie & Fitch [ANF>ANF].
| Program Trading Numbers | ||
| Buy | Sell | Fair Value |
| 12.45 | 8.55 | 10.50 |
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.