Snowball Rolls Downhill

The S&P futures were off more than 7 points in extremely thin Globex trading--nothing new there--enabling the tail to wag the dog once again as emotional selling led to a gap-down opening on the NYSE. For example, America Online (AOL) opened down 3 5/16 at 119. It rallied 1/2 point, then traded down to 117 as the trap door opened and took out all the sellers. The stock then tacked its way back to finish at 125 1/16. Don't hold me to an eighth, but AOL traded a total of 16 1/4 points during the day after the opening. Thank you futures, programs, specialists, volatility, analysts and media/Internet hype. That's why day trading offers opportunities in the current environment (more about that in my Five-Week Day Trading Course).

Our earnings play lesson in Harley Davidson (HDI) is complete. The stock traded to a low of 58 yesterday before closing at 59 3/4 on almost 1.5 million shares, almost 200% more than its normal volume: A solid trade by many of the momentum players on page one and a better one for those who sold before the announcement. Obviously, with all that volume, real players came into the stock yesterday, institutions that sold, possibly based on a quarter announcement. . . hardly. The bottom line is that most of that volume was early players who got in and got out.

Yesterday we got the close below the low of the high day in the S&P 500. Look for the S&P futures traders to run the stops above 1399.09, which was yesterday's high in the S&P 500 cash, and then go short below 1394.68, and again if it trades below yesterday's low of 1386.80. I reference the S&P 500 because it's the key index. (You play the SPDRs off the S&P cash, not the futures.)

Outside of the drugs, sectors were red all day during yesterday's choppy search-and-destroy market. Save the AOL five-minute chart for a reference of the breakout of the trading range to start the rally. It's a good one for your library.

Target Stocks Of The Day  Keep an eye on EMC [EMC>EMC], Network Solutions [NSOL>NSOL], Qualcomm [QCOM>QCOM], Computer Sciences [CSC>CSC], Schering Plough [SGP>SGP] and Intuit [INTU>INTU].

Program Trading Numbers
Buy	Sell	Fair Value
12.15	8.25	10.20

Also watch Schwab [SCH>SCH] and Merck [MRK>MRK], which were in consolidations but gave entry points below consolidation breakout levels. They warrant a close look.

Editor's note: If you want to learn more about Kevin Haggerty's trading strategies, click on the link below to go to his new series of tutorial articles.