From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed,OTC and Option trading in addition to all major Exchange Floor Executions. He is the creator of a series of training modules geared for professional traders, including "How I Trade Major First Hour Reversals For Rapid Gains," "How To Successfully Trade The Haggerty 1,2,3 Strategy," and "How To Successfully Trade The Haggerty Slim Jim Strategy For Explosive Gains." Mr. Haggerty is a co-founder of Tradingmarkets.com and is the founder of www.KevinHaggerty.com.

The $SPX had advanced +10.3% in 14 days to a key price (1384-1386) and time zone (4/8-4/9), and in the previous commentary I said the highest probability was a reversal, not acceleration through the price zone. The .386RT to 1576 from 1257 is 1379, and the .236RT between 1576-769 is 1386. The 270-Degree angle measured from the 3/17/08 1257 low is 1384. So far, during this rally, the $SPX has not closed above any of these levels despite the $SPX hitting 1386.74 intraday high on Monday, from which it has reversed to a 1349.97 intraday low yesterday and 1354.49 close (-0.8%). The 4MA's of the volume ratio and breadth were also short term over bought, as they always are, preceding the reversal from 1386.74. The three primary factors which make a reversal the highest probability are Time, Price, and Momentum, and all three were present going into Monday.

You can't know the extent or duration of a move, but you can anticipate the highest probability levels for the next reversal swing. The .382RT to 1257 from 1386.74 is 1337 and the .50RT is 1315. The .236RT to 1576 from 1257 is 1332, and the 180 Degree angle from 1257 is 1329. Day traders will utilize my daily Volatility Band levels in confluence with those other key levels to make high probability trading decisions, which is what the trading business is all about.

NYSE volume has been declining, and prices have been rising the last six days following the $SPX +3.6% day (4/1), but the decline since the 1386.74 high on Monday has been on light volume of 1.19 and 1.21 billion shares, so it is more the Generals on the bench, and not selling pressure initiating the pullback. However, our primary focus Energy sector has been on a tear with the XLE [AMEX:XLE] advancing 8 straight days and +7.0%, while the OIH [AMEX:OIH] is +9.0% for the same period. The intraday travel range for this sector has been excellent and has provided multiple opportunities for day traders. It has been some ride the last few years trading this sector, and I don't see this changing anytime soon. The Generals are overweighing a smaller universe of 50-75 big cap stocks, and my daily focus list in the trading service reflects this emphasis. A sector to watch is the $TRAN (transportation index) which also reversed on Mon from 5037, and closed at 4803 yesterday (-3.5%). This index hit its bull market high at 5486 on 7/18/07 and started declining. It was a negative divergence to the $SPX which didn't top out until 10/11/07 at 1576. By the same measure, it was a positive divergence when it hit its current bottom at 4083 (-25.6%) on 1/22/08, while the $SPX hit the 1257 low on 3/17/08. The $TRAN made a significant retracement to the 5486 bull cycle high hitting 5037 (+23.4%) on 4/7, versus the .707RT to 5486 at 5075, and .618RT at 4950. If this reversal continues, look for any positive divergence for an early indication of the next upside $SPX reversal.

Have a good trading day!