Why You Should Take Only Significant Setups

March 20, 2003
Kevin Haggerty

NYSE volume was the
lowest of the past six days at 1.4 billion, the volume ratio was 64 and has a
three-day moving average of 75 and a six-day moving average of 68, which won’t
be sustained unless Saddam checks into Marine headquarters in Kuwait and says,
“No mas.” That’s not a very high probability. Breadth was just +125 following
the previous soft day of +270. This again points out the program concentration
in the SPX, which supports the current allocation surge from bonds to stocks by
the institutions.

Until the 2:30 p.m. ET
program activity started yesterday, the SPX was churning around the 870 level
before the late rush forced an 874 close. The
(
SPY |
Quote |
Chart |
News |
PowerRating) volume was also the
lowest of the past six days at 49 million, while the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s traded 91
million shares and has a six-day volume average of 104 million, which is high.

From a daytrading
standpoint, which is now controlled totally by the Iraq action, I only have
interest in very significant setups due to some emotional reaction. With the
hordes of media over there, which to me makes no sense, there will be a wealth
of misinformation that will create many gyrations which are not trader friendly
and will enable lots of futures manipulation/games to occur. New traders would
be better served to sit it out today and Friday, which is also option
expiration.

Certainly if Saddam bails
out to either exile or gets whacked, the major indices will accelerate to the
upside. If he starts using the chemical/biological weapons and/or terrorists hit
US soil, then the recent bulls will be very disappointed. Most of the larger
hedge fund short players have covered, so this will mean a major downside air
pocket and an even bigger drop if Israel gets involved in any kind of
retaliation. I have included the SPX chart in today’s commentary that outlines
the levels mentioned yesterday. If you try to trade the intraday jiggles today,
go to smaller size and tighter stops. I strongly suggest you only attempt to
trade the most defined setups, especially around the volatility bands or other
key levels.

Have a good trading day.