Zone

The
major indexes all finished slightly positive
yesterday.
The NYSE volume ratio improved to 46. However, the Nasdaq, S&P 500, Dow and
NDX 100 all had positive volume ratios of just over 50. The breadth was again
negative for the NYSE at -822 and -803 for the Nasdaq. The surprise was the edge
of advancers over decliners for the NDX 100. Selling has abated for many of the
NDX “dog” teenagers and probably shorts are covering in many of these,
in addition to bottom fishing. 

The volume ratios vs. the
negative breadth told us there was bottom fishing by the Generals but not across
the board. The TRIN turned positive at .9 by 10:00 a.m. after the Trap Door down
opening. The S&P 500
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gave you a defined Trap Door entry that was
also an RST buy that goes back to the 1:35 p.m. bar on your five-minute charts
the previous day, which was the 1 point. The setup bar for both was yesterday’s
9:45 a.m. outside bar that reversed one high in two closes. (I will be
discussing the best ways to trade with the market makers and specialists at the
Las Vegas seminar.)

TRIN dropped to a favorable
.6 by 10:40 a.m. with the SPX +4 at the time, up from -10 at 9:45 a.m., the Dow
+12 and the Nasdaq 100
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+5. This favorable dynamic remained positive,
preceding as it normally does further upside advance. By 11:45 a.m., the SPX was
+11, NDX +20 and Dow +55.
The Dow
reversed to a -44 by 3:10 p.m., then rallied to finish flat. The SPX finished +7
while the NDX which went -2 at 3:10 p.m. ended +11, closing at 1365.48.
Program
activity was high yesterday. With the sell programs in the afternoon, the TRIN
stayed below .7 the entire time, which was very positive. 

I am explaining some micro
intraday action just to make you aware of how important the intraday dynamics
are for both daytraders and position traders who want to play this next rally.

There is a lot going on right now. The
SPX had an intraday low of 1073 vs. the .786 retracement to the 10/98 low which
is 1057. The last time it approached this zone, it rallied from 1081 to 1316,
stopping right at the 200-day declining EMA. Right now, the 200-day EMA is up at
1245, the 50- at 1172 and the 20- at 1138. The index closed at 1092.54. There is
room for retracement.

As I mentioned yesterday,
all of the indicators are oversold.
Today
is a minor cycle day with the next one coming on 9/17 and then we come into late
September with a confluence of four cycles coming together. There is also a
triple witch option expiration on 9/21. Needless to say, we are in a volatile
zone that is ready to explode. The positive catalyst could be growing perception
of capital gains cuts or a preemptive strike by “Greencan” on
rates.           

We certainly know what the
negative news does, but with so many teenagers like
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,
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ORCL |
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and
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that can see zero very clearly, how much more downside emotion is left
in those stocks? There is certainly downside room in the Basics if the
perception gets desperate on the economy. I guess we should worry about it after
this rally.

Stocks
Today

Program
Trading Numbers

Fair Value

Buy

Sell

0.85

 
1.90 


  0.50  

If they continue some
bottom fishing and short covering, I would look at
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,
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ORCL |
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,
(
EMC |
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and
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VRTS |
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. Other stocks are
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BEN |
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and also
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VZ |
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and
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AOL |
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.
Somebody asked me, “How did you pick
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BLS |
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?” I picked it right off the
screen. There’s no question there’s volume coming into these stocks that control
the broad bands, etc. Also
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,
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MYL |
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and
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.

In the Semis, I would stay
with the SMHs which is at a key retracement level here and has had three days of
lower highs and lows on declining volume so you should be ready if they come for
them. Intraday,
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and
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get it done for you. 

In the Biotechs, the four
best charts are
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AMGN |
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,
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BGEN |
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,
(
IMCL |
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and
(
GILD |
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.  

Have a good trading day.


Five-minute chart of Monday’s S&P 500 (SPX) with
8-,
20-, 60-
and
260-EMAs

 


Five-minute chart of Monday’s NYSE TICKS