The major indexes all declined Friday, with the
SPX -0.3% to 1451.19, the $INDU -0.3% to 12647, and QQQQ -0.4% to 45.26.
NYSE volume was 1.45 billion shares, and the internals neutral with the volume
ratio 42 and breadth -114. The internals were not indicative of the
percentage index declines. All of the major indexes led by mid-cap and
small-cap made new multi-year highs last week, but the SPX finished -0.3% on the
week, and the $INDU -0.9% to 12647. The QQQQ finished green on the week at
+0.8%, due mostly to the semiconductors, as the SMH gapped up to the top of its
6 month trading range the last two days to finish the week at +3.1%. The
leaders for the last 5 days were commodity sector stocks (DBC +4.9%), gold ($HUI
+3.2%), semis (SMH +3.1%), energy (OIH +2.8%) and XLE (+1.1%). The
downside leaders for the week were the homebuilders (XHB), REITs (IYR), drugs
and health care (PPH, XLV), in addition to the banks ($BKX) and brokers ($XBD).

This week has a seasonal up-bias with the last 3
days of the month and the first 2 days of March. Also, the SPX and $INDU
have pulled back 3 days to rising 20 dema zone, and this has preceded most of
the previous reversals. Seasonal bias and pullback is positive, which
offsets the short-term internals, which are still neutral with the 4 MA of the
volume ratio 49 and breadth only -114. The $INDU 5-RSI is 35.15, with the
SPX at 45.74. The internals have worked off a short-term overbought
condition following the 1455.54 close on 2/16/07, when the 4 MA ratios were 66
and +810. A new cycle high of 1461.57 was made on Thursday, while the week
closed at 1451.19. For the initial 8 weeks of 2007, the SPX has closed
down for 5 of them, but there has been no real selling pressure, so prices
continue to work higher in a smaller universe of stocks.

There won't be any selling pressure until the
SPX/$INDU trend of higher highs then lows is broken. Only when buying the
dips creates red ink for hedge funds and aggressive generals will the selling
pressure pick up. Two early red-alert indicators are MER and NYX, and
right now their daily chart patterns have turned short/intermediate-term
negative. The $XBD closed at 250.61, and by taking out the 247.06 low, the
short-term trend will also turn negative. The daytrading emphasis has been
correctly focused on energy and other commodity sector stocks, and that remains
the same until the game changes. The First Hour reversal strategies in the
major indexes have continued to be major sources opportunity for daytraders, and
with the current predominately electronic opening process in place, the
inefficiencies will continue to fuel the First Hour "game" for traders.

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.