Strategy Gains Despite SPX Two-Day Decline

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 declined -0.3% on both Monday and Tuesday, with intraday lows of 1492.68 and 1490.54. However, the plan was to buy weakness this week into the end of Q2 if it was near or at the bottom of the 1540.56-1487.81 trading range (6/25) commentary. There were significant gains from the Monday 1st Hour RST reversal in the SPX, in either the futures or the SPY, depending on what your trading choice is. Yesterday, there was a morning 1-2-3 higher bottom reversal, where, for example, the SPY ran from the 149.51 entry to 150.46 before reversing in the afternoon decline. When there are setups like this in the SPX, there are most often similar setups in the DIA, QQQQ and IWM. For example, yesterday, the IWM also had an RST reversal that ran +.78 before the afternoon reversal, and I have included that chart and circled the key swing points, but not numbered them, as that is only for the people who have purchased the trading modules or are members of the Trading Service. The SPY closed at 4 PM yesterday at 149.06, but the futures got hit into the 4:15 PM close, as did the SPY, which traded down to and closed at 148.29. The 4 PM NYSE close and 4:15 SPY differential close makes no sense whatsoever.

NYSE volume was 1.73 billion shares yesterday, with the volume ratio 32 and breadth -877. Gold and energy led the downside, with the $HUI -2.4%, XLE -2.1%, and the OIH -1.6%, which closed at 173.76, back to its rising 20-day ema of 173.45, after a 5-day pullback from the 180.93 high. As the leading sector, it remains a focus this week into month end. The intraday volatility is excellent regardless of direction, and not a day goes by without defined strategy trades in our core group of about 20 energy stocks, in addition to the OIH and XLE. Primary support on continued weakness is the 165 zone. Other inflation-type trading stocks that we use in the Trading Service are FCX and PCU, both of which have high average implied volatility, so they are also excellent for daytraders.

If there is continued weakness this morning, and especially if the SPX 1487.41 swing point low gets taken out, look for a sharp upside intraday contra move reversal. However, after this week and the 1st few days of July, and the 1487.41 doesn't hold, look for the SPX to trade down to the 1430-1435 zone, which includes the 200-day ema and the 1540.56-1487.41 range downside price objective of 1434. See chart in 6/25 commentary.

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.