The Month End Manipulation Carries Traders

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 confirmed the month-end month bias in a primary uptrend (5/29 commentary) and finished the first day of June at a new 1536.34 closing high. This was +0.4% on the day and +1.4% for the week, while the $INDU was +1.2% to 13668. The QQQQ was +2.0% on the week, led by the SMH, +2.0%, which had pulled back to its 9-month trading zone (35.95 high) with a 35.89 low on Wednesday, but bounced to 37.25 (+4.5%) by Friday. The price zone opportunity was duly noted in the trading service in anticipation of a move. NYSE volume was 1.48 billion shares on Friday, with the volume ratio 71 and breadth +1114. The SPX has now closed up 5 straight days, and the internals are now short-term overbought, with the 4 MA's at 66 and +961.

The key magnet that will be taken out before any significant decline is the SPX 1552.87 3/24/00 bull cycle high, which is just 16.53 points away (+1.1%), an easy target if the up-bias for the last 3 days of May first 5 trading days of June continues to play out. However, the SPX futures are -5 points this morning at 7:15 AM ET, with some hype on another dip in the China market. The direction on the open is not as significant to daytraders as how extended the move is, because then the key 1st Hour reversal strategies set up. A prime example was on Friday, as the SPX hit 1540.56 on the 10 AM bar, versus the +1.0 Volatility Band at 1539.70, which gave traders a short entry at 1539.57. It wasn't a big move, but it did trade down to 1532.24 before closing up at 1536.34. The same move on the SPY was 154.25 to 153.51. In addition to the +1.0 Volatility Band, there was also longer-term symmetry in play like 1539, which is a 270 degree angle from the 768.63 10/10/02 bear market low, and 1536, which is the 3.146 Fib extension of Wave 1 (768.63-954), measured from 954. The Volatility Band was the intraday symmetry, in confluence with longer-term symmetry, so there was a higher probability for the contra move. This is just part of the methodology I incorporate in all of my strategies, whether it is day trading, swing trading or longer-term market positions.

The 1552.87 high is the obvious all-time high magnet, which "they" will take out. But as the major indexes push to new high territory, they are led by a much smaller universe of stocks, and their new high average has continued to decline for the last 5-6 weeks, as well as the negative divergence in money flow. The current rally is 55 trading days old, the SPX up 5 straight days, and the short-term internals overbought, so that is not what you call a short-term trader's edge. The energy sector continues to be a primary daytrading focus, as both the OIH and XLE are trading in 10-day ranges at their rally highs, while the intraday volatility continues to provide many opportunities. The sector is still the most significant contributor to daytrading results. So far, the equity market has ignored the rising interest rates and many of the obvious negative economic and financial conditions, but that will not be the case for much longer. The TLT has broken the head and shoulder neckline below 86.60 (see chart) and has declined for 4 straight weeks. I have included the significant downside symmetry zone on the chart, which includes the head and shoulder pattern objective, Fib extensions and square of 9 key levels from the 96.26 high. It looks to me like rates are going higher, and that is in concert with the inflationary/recession scenario that non-biased data sources indicate.

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.