You Will Be Busy

July 11, 2001
Kevin Haggerty

In the July
3 text, we gave you a
heads up after the Nasdaq had run 210 points or 12.7% in nine days and was
short-term overbought, with minor cycle timeframes kicking in on July 3 and July
10. The decline started the next trading day, July 5, trading down to
yesterday’s low (July 10) of 1624.80 vs. the .618 retracement to the 1349 low
which is 1626. Remember, these are just alert zones. You are not looking for an
exact number to be hit but just to be alert for any reversal pattern action at
these levels that you can take advantage of.

The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) hit
an intraday low of 1179.93, closing at 1181.52 which is right on the daily chart
1,2,3 breakout level that gave the rally off the April low some acceleration.
The .618 level for the SPX is 1171 and the .786 is 1131. The April rally started
from the long-term .786 retracement zone which was 1058 vs. the actual April low
of 1081.You were given those alerts well in advance, so you were anticipating
any reversal patterns from that zone, i.e., the 1,2,3 breakout, at worst
case.Â

In case you have forgotten,
there is an option expiration next Friday, which will create some erratic tape
action even though it’s a minor one. From a trading standpoint, you must be
alert for a rally off this .618 zone for both the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) and S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating), and not be surprised if, after it has run its
course, we sell off to the 1504 NDX .786 retracement level and the SPX .786
retracement zone at 1131, not to mention the possibility of new lows, which were
discussed in yesterday’s text.

New lows would probably put
the majority of NDX 100 stocks in teenager status. The alternate sequence would
be a continued move down with just two or three opposite days right to the .786
zone on both indexes. From a daytrading standpoint, we could care less because
you only take entry when it trades through your entry point with tight stops.
You are constantly probing direction and
win on a bigger scale when you get big follow through like we got on yesterday’s
shorts on
(
VRTS |
Quote |
Chart |
News |
PowerRating) (+5.65 points from entry),
(
MERQ |
Quote |
Chart |
News |
PowerRating) (+3.15) and
(
CIEN |
Quote |
Chart |
News |
PowerRating)
(+2.44).Â

These are three stocks that
set up below all of their declining EMAs, which is the land of puke shots as
holders just blow them out to make the pain go away. Their pain is our glee,
because all we did was take a continuation short entry below the low of the
previous day and got in step with the sellers which was, of course, in concert
with the market direction,. Isn’t that what we’re supposed to do?

Today will provide some
excellent opportunities, long or short. For example, yesterday’s NDX low was
1624.80. Will you play first entry short below that low or wait to get a second
entry short if you can get it? If it breaks yesterday’s low, shakes the tree on
the first few bars, then reverses that low to the upside, will you play long?
Follow that same thought process for stocks and I will be surprised if you are
not busy today. The only thing holding the daytraders back today would be an
absolutely sideways tape, and I don’t think so.

On the NDX, it gets going
to the upside out of its closing range and its 8-period moving average of highs
above 1631. It gets some more upside room above 1652. You know where yesterday’s
lows are, if need be. Make sure you frame your intraday retracement levels from
yesterday’s high to anticipate profit-taking points and/or short levels if
that’s what the dynamics indicate at the time.

(September
Futures)

Fair Value

Buy

Sell

6.30

7.55

5.10

Stocks
Today

Daily chart setups — and
there aren’t many of them on the
long side today are:

Have a good trading day.

Tuesday’s S&P 500 five-minute chart
with 8-, 20-,
60- and 260-period
EMAs

Tuesday’s NYSE
TICK five-minute chart

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You Will Be Busy

BUY THE FEAR, SELL THE GREED

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