What The Generals Might Do In June

  • June 10, 2003
  • Kevin Haggerty

What Friday’s Market Action
Tells You

The expected follow through from Friday’s reversal saw
volume on the lighter side, with NYSE volume at 1.3 billion, but the volume
ratio was just 17, with breadth -1116, which certainly highlights that you sell
when you can, not when you have to. All of the major indices and sectors
declined, with the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) closing at 975.93, -1.2%, the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) -1.4%, and the
(
QQQ |
Quote |
Chart |
News |
PowerRating) -1.3%. In the sectors, the
(
BBH |
Quote |
Chart |
News |
PowerRating)
was -2.6%, the XBD -2.4%, and
(
SMH |
Quote |
Chart |
News |
PowerRating) -2.1%, as they led the downside, but
certainly no surprise there because of the recent big percentage up moves during
this rally so far. The sector weakness was across the board, as the BKX was
-1.8% and the CYC -1.7%. The oil service stocks finished small to the upside,
with the
(
OIH |
Quote |
Chart |
News |
PowerRating) +0.6%. The VXN which gave us a heads up prior to the reversal
day closed at 37.43, and the VIX at 23.71, after having traded up to 24.67
during the day.

For Active Traders

One day down after Friday’s reversal from an
extended volatility band is not a correction relative to the daily charts, as
the SPX closed and is still above its rising 8-, 20-, 50- and 200-day EMAs. As I
have mentioned in recent commentary, the Generals will try to make the second
quarter ending in June positive, barring any overt news. They would, I am sure,
rather get this market moving again to the upside from lower prices and levels
that will attract some of those “afraid to miss the move” buyers.
Having said that, there is only one day down on the daily chart after Friday’s
reversal, but it is about seven bars on my longest term intraday chart and
daytraders should be ready for any intraday upside reflex, as the SPX declined
-3.6%, QQQ -6.6%, and the SMH -9.6% on those seven two-hour bars.

The Generals have a better shot of generating
some greed from the 950 – 960 zone on the SPX, as they will force some shorts to
scramble, and those that missed the breakout move above that 925 level, and
again on the push through the 960 – 965 level. It’s not about MOT or FRE execs
resigning, it’s about the Generals deciding whether the market is fragile enough
to push it higher into quarter’s end, delaying an inevitable correction from a
key time period, which has three dates from June 11 through the 20th. 

Today’s Plan Of Attack

Active daytraders, especially futures traders,
either caught the initial move down from the Flip Top pattern with entry on the
10:10 a.m. ET bar, or else you ended up scalping yesterday. In the last 15
minutes, there was a quick push up in some of the semiconductors on increased
volume. Bottom fishing or short covering, I don’t know, but because of the
narrow-range patterns they had at the lows from 10:30 a.m. until that little
push into the close, they will be a primary focus today on any reflex up. The
best action was in
(
QLGC |
Quote |
Chart |
News |
PowerRating),
(
XLNX |
Quote |
Chart |
News |
PowerRating),
(
KLAC |
Quote |
Chart |
News |
PowerRating),
(
NVLS |
Quote |
Chart |
News |
PowerRating) and
(
AMAT |
Quote |
Chart |
News |
PowerRating) and also the SMH. Continuation shorts would, of course, be breaking
those closing ranges to the downside and second entry would be best if we go
south. 

Have a good trading day.

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

Five-minute chart of Monday’s NYSE TICKS