Watching The SOX

• February 14, 2002
• Kevin Haggerty

Yesterday
the market gave us a last-hour mark-up, rather than down. Programs
were active into the close. NYSE volume was better at 1.2 billion, with the volume
ratio at 64, and breadth positive at +660. The
(
SPY |
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PowerRating)s finished +1.06%, the
(
DIA |
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(
QQQ |
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better than expected, and we have seen the retail stocks strong as of late. The
(
$RLX.X |
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PowerRating) was up +1.06% on a breakout of a cup-and-handle.

The
(
$SOX.X |
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PowerRating) had a
good day at +3.9%, led by
(
KLAC |
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and +28% from the low of the RST buy pattern on Jan. 22-23. As I mentioned in
previous texts, the SOX had an RST buy with a Kings and Queens entry on Jan. 24.
This is a key level for the SOX, as it closed at 569.38, which is right at its
233-day EMA of 569.96.

The
(
SMH |
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PowerRating)s closed
above its down trendline for the first time and also above its 200-day EMA of
45.44. Shorts were covered above 45.68, the last swing-point high, but we’ll
look for a reversal short entry again by keying on the SOX at the 233-day EMA.
The SOX has not retraced more than .38 to the September low and is sitting in a
head-and-shoulders potential top pattern that only the Generals can negate. Many
of the semis, like KLAC and
(
AMAT |
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PowerRating), are up 90%-115% in this rally. Both had
big volume days yesterday.

Option expiration is
Friday, so the volatility will be in the daytraders favor. The dynamics were
positive all day yesterday, with up-volume maintaining better than a 2:1 ratio
over down-volume until the latter part of the day. Breadth was also positive.
The TRIN was below. 75 all day, until it closed at .85 due to various program
activity into expiration.

The 60-minute trend
hasn’t changed and is still up for the major indices. So far we have gotten the
expected oversold bounce from the .50 retracement level to the September low in
the QQQs, which have rallied +6.1% low to high vs. an expected 5%-10%. The SMHs
have run +11.3%, while the SPYs have gained +4.2%. Until that changes, there is
not much more I can say on the shorter-term market action. Having said that, the
SOX is on short watch if it reverses from this 233-day EMA.

Stocks
Today

Buying pressure in the
NDX 100
(
$NDX.X |
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and several biotechs. There were only 25 NDX 100 stocks that traded 100% or more
of their 30-day average volume.

Daily chart long setups
are
(
LOW |
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(
TGT |
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(
LIZ |
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(
JNY |
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(
COST |
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Also,
(
NOC |
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(
GD |
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and
(
RTN |
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PowerRating).

In the financials,
(
AGE |
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PowerRating),
(
JEF |
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PowerRating) and
(
STT |
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News |
PowerRating).

Other stocks:
(
MXIM |
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(
MCHP |
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(
SEBL |
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(
FMKT |
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(
DGX |
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PowerRating) and
(
ALLY |
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News |
PowerRating).

Have a good trading day.

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

Five-minute chart of
Wednesday’s NYSE TICKS