Read Larry Connors' blog – Short Term Trading Strategies
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. For a free trial to Kevin’s Daily Trading Report, please click here.
The SPX has been trading in 875-830 range for 11 days now, and has only closed above the .707 863 .707RT to 944 three times. It closed at 857.51 yesterday (-1.0). The INDU has been locked in the 8200-7750 range for 17 days and went out at 8025 (-0.6).
NYSE volume yesterday was the lowest in the past 11 days at 1.4 bill shs, with the volume ratio 22 and breadth -1203. There has been selling into strength in the current SPX range by hedge funds, and stops tightened, because they can't afford not to bank some profits coming off last year's disastrous results. The short term trend remains up as the major indexes remain above rising 20 and 50DEMA's, but the market is extremely extended in price relative to time, so there are a lot of nervous longs, and with the negative momentum divergences the market is vulnerable to an "air pocket" to the downside.
The primary focus in the Trading Service continues to be technology, energy, and materials, in addition to selected industrial stocks. The daily focus lists centers around these sectors, and this has resulted in multiple defined strategy opportunities each day regardless of direction. Crude oil peaked on 7/11/08 (USO) versus the SPX at 1576 on 10/11/08 and has down the same thing at the lows as the USO made a 22.74 low on 2/19/09 versus the SPX 667 low on 3/6/09. After hitting 32.16, the USO has made a .618RT to the 22.74 low and is now in position to complete a 123 HB. Aggressive traders have initiated a position on the .618RT, while others will enter on a Flag B/O just under 30, and then there is the 123 Trend entry above 32.16 which will force any laggards to get involved.
The SPX is in a similar potential 123 HB situation but it has yet to get a Fib correction down to set up the 3 point so it is still early. For the same reason as the USO, all major market players will be forced into the market after a higher trough and then a 123 Trend entry to new highs, which will be the start of a Wave 3, and that is how I still think it will play out.
Have a good trading day!
Click here to find full details on Kevin's courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.
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