The Primary Daytrading Focus In This Market

Kevin Haggerty is a full-time professional trader who was head of trading for Fidelity Capital Markets for seven years. Would you like Kevin to alert you of opportunities in stocks, the SPYs, QQQQs (and more) for the next day's trading? Click here for a free one-week trial to Kevin Haggerty's Professional Trading Service or call 888-484-8220 ext. 1.

The SPX has declined 4 of the last 5 days, -2.4% from the 1576.09 cycle high on 10/11/07 to a 1536.29 intraday low yesterday, before closing at 1538.53 (-0.7%). The $INDU was -0.5% to 13913, and the QQQQ -0.6% to 52.87, and then was up +1.02% at 6:11 PM and after hours trading on the YHOO and INTC earnings news. At that point, YHOO was +9.5% and INTC was +5.0%. Both stocks had already made significant moves off their August lows. NYSE volume was on the light side at 1.28 billion shares, the volume ratio negative at 23 and breadth -1435. The SPX traded down to its 20-day ema of 1536.67, so with or without YHOO/INTC, a bounce is likely. However, in the real world, it is all about sub-prime, the declining $US Dollar, a housing market that has gotten significantly worse, and the credit/liquidity crisis, which has more negative surprises waiting for us going forward.

Crude oil has spiked even more, settling at 87.61 yesterday, another all-time high, accelerated by probably the dumbest resolution ever considered in Congress based on the current Middle East condition. Pelosi, the pin-head from San Francisco, seems to be getting cold feet, so if it is not passed, and the Turks back off, then crude oil might do the same. The combination of crude oil at 87.61 and the $US Dollar trading at the 1992 lows, having closed at 78.25, up slightly from the 77.66 low on 9/28/07, is obviously not a positive for the equity and bond markets going forward. Gold and other hard commodities have also spiked, and the Fed is growing the money supply at double-digit rates, so those who say inflationary recession are right on.

The SPX has been pushed higher by a smaller universe of stocks, led by the multinationals, energy, commodity and select technology stocks. The financials, which comprise 20% of the SPX weighting, has both the $BKX and $XBD trading below their 200-day emas, as are the RTH/XRT, SMH and $TRAN. The percentage of NYSE stocks above their 200-day emas has a significant negative divergence, starting with the 85.40% at the 2/3/07 1461 SPX high, 68.5% at t he 7/16/07 at the 1556 high, and 57.49% at the 1576 10/11/07 high. Maybe this shrinking universe of leadership makes the PPT work that much harder to manipulate what used to be a free market.

Our daytrading focus has been and remains the multinationals, energy, commodity and select technology stocks, in addition to the indexes and major ETFs. This week is a key time period, as I mentioned in previous commentaries, and is also an option expiration week, so volatility was anticipated, and now the SPX has declined 3 days from the 1576 high to the 1563.67 20-day ema, with the pre-market SPX futures +10.5 points as I complete this at 8 AM. It should be an active trading day, but after the gap opening, it will start with Trap Door shorts and RSTs in stocks that get artificially extended, setting up the 1st Hour contra moves. After that, we'll have to see what the buyers really want to do.

Check out Kevin's strategies and more in the 1st Hour Reversals Module, Sequence Trading Module, Trading With The Generals 2004 and the 1-2-3 Trading Module.

Have a good trading day,
Kevin Haggerty