What’s His Name Again?

August 21, 2001
Kevin Haggerty

The
major averages finished on the plus side on
a very light volume day, which did nothing for you and your assessment of market
dynamics. The NDX 100
(
NDX |
Quote |
Chart |
News |
PowerRating) finished +1.3%, retraced 30% of the previous
day’s 4.1% decline, closed in the top of its range, but with a lower high and
lower low. This does, however, set up a possible swing point Change in Direction
move today. The Nasdaq traded less than 65% of its average volume at 1.137
billion shares, a volume ratio of 58, breadth was a push at just +70. The NYSE
volume was also extremely light at 890 million, which is just 80% of its average
volume, a volume ratio of 58 and breadth positive by +433.

The
(
SPX |
Quote |
Chart |
News |
PowerRating) retraced
one-half of the previous day’s decline, closing at 1171.41, +0.8%. The .618
retracement to the 1081 low is 1171, which remains a magnet if you look at the
last three swing point lows on your daily chart. The SPX gave us an inside-bar
top-of-the-range close. Both the NDX and SPX are set up for continuation long
entry above yesterday’s high, but I would place a very tight stop because there
is always second entry, or even third, if it is a crazy day. But the downside
risk is bigger.

In spite of the light
volume, the NDX gave us three defined moves yesterday. The first was a contra
rally from the .786 retracement zone, which is 1504 and 37.52 on the QQQs.
Yesterday’s low was 1506.53 for the index, and for the QQQs, it was right on the
number at 37.52. This bounce ended at an extension level then retraced .618
before the afternoon rally to close on the highs at 1536.

The SPX gave us the same
three-trend sequence starting with a contra rally from the 1161 intraday low on
the 10:00 a.m. bar. Review the five-minute charts for both the NDX and SPX and
do the numbers because if you don’t, it’s a waste of time reading this text most
of the time.

This is a stronger
minor-cycle week, specifically Wednesday through Friday, and it will be a low.
So far, the NDX has hit its .786 retracement level, while the SPX hit 1156 on
Friday vs. its 1131 .786 level. I expected some overshoot to the downside of the
.786 level for the NDX, while the SPX traded down some more to the 1131 zone.
That remains to be seen. This has certainly been the pattern before, as the NDX
100 tech wreck dominated the weakness.

If we get a significant
volume and up-price day with participation in major sectors like semis, basics,
financials and retail, then the minor-cycle low is probably in and we could run
through the end of the month and Labor Day. I have given you the alerts and
numbers. Now we must wait for the Generals to give us a Change in Direction
signal. Many that understand
options strategies are already long as of Friday and yesterday with a defined
risk.

(September
Futures)

Fair Value

Buy

Sell

2.70

3.80

1.50

Stocks
Today

Have a good trading day.

P.S. Yes, it’s
intentional that I did not mention Greenspan today. That gets old.

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

Five-minute chart of
Monday’s NYSE TICKS

Do you have a
follow-up question about something in this column or other questions about
trading stocks, futures, options or funds? Let our expert contributors provide
answers in the TradingMarkets Trading Advisor! E-mail your question to questions@tradingmarkets.com.
For the latest answers to subscriber questions, check out the Q&A section,
linked at the bottom-right section of the TradingMarkets.com home page.

What’s His Name Again?

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources