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
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Monday was the anticipated mark-up day, as the President was
all over the TV on the economy in front of the elections. The SPX was
sitting in a 6-day range, and this was the 4th mark-up day since the SPX 1327
high was taken out. Most of the gains above 1327 have come in just 4 days
(see Oct 23 commentary). Yesterday was the normal narrow range day that
follows these mystery moves. The SPX had a daily range of 5.4 points,
closing at a new high of 1377.33 (+.02). $INDU closed at 12,127 (+0.1)
while both the QQQQ (-0.7) and $COMPX (-0.5) finished red. NYSE volume
expanded to 1.69 billion shares as month-end activity continues to pick up.
The volume ratio was 59 and breadth +391 vs +543 on the Monday markup.
Despite the SPX making new cycle highs, the 4 MA's of the volume ratio and
breadth are only 55 and +352. This is not unusual when nothing happens for
five or six days, and then there is a mark-up day initiated by buy programs in a
smaller universe of stocks. This forces many of the portfolio managers to
go along with the higher prices, because most now are just quasi-indexed funds
anyway. In Monday's commentary, I said any weakness would be reversed in
front of the election and month end. Also, there is an added incentive
because October is fiscal-year end for a few very large mutual funds, so they
will be pushing price for their major holdings.
In the sectors, it was all energy yesterday, as the OIH
(+3.6%) hit the 200 dema at 135 before closing at 134.50. That is a +14.2%
in 14 days, despite the decline in crude oil. The advance was off a key
price zone, with symmetry from 120.26-118.89. The low was 118.19. It
was also extremely extended on a 1-year standard deviation basis, so it was a
very high probability reversal, despite the negative hype on energy stocks.
Crude oil remains extended beyond the 1-year -2.0 standard deviation zone, with
the most extreme band down at the 55 level. You have to remember, the high
from crude oil (December contract) was 80.70 on 7/14/06, and the SPX rally
started on 7/18. Crude reversed from the 1-year +2.0 level and the SPX
from the -2.0 standard deviation zone, which was why it was a key price zone
following the May 1327 high. The SPX is now extreme to the upside, and
based on the angle of ascent, it will most likely be a similar knife to the
downside on the next reversal.
Today is the Fed circus, so price action will probably go flat
until the futures games start at 2:15 PM. If there is something in it for
daytraders, it will be during the first hour, which is when most of the money is
made anyway.
Have a good trading day,
Kevin Haggerty
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.
