New Highs but Same Sector Focus

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.

On Tuesday, it was a "fear day" with the SPX -1.4% to 1510.12 on NYSE volume of 1.64 billion shares, with the volume ratio 14 and breadth -1761. Yesterday, it was a "Pigs at the trough," with the SPX +1.9% from the previous 1518.36 close on NYSE volume of 1.66 billion shares, with the volume ratio 87 and breadth +1540. The $INDU made new cycle highs above 13690 in the first half hour, led by the AA gap, and the SPX took out the 1540.56 cycle high on the 3:15 PM bar. The SPX gained 28.9 points on the day, and 25.2 points of that gain came in the first 30 minutes, and from 2:25 PM to 4:00 PM. Is it a coincidence that there was a significant upside market spike when the "negative Iraq report" was due, and the President was scheduled to speak for an hour, not to mention several administration officials making TV appearances talking up the economy. If it was, it follows a definite pattern which I have been keeping track of since the run-up to the mid-term elections which started last June. My guess was that the PPT (Plunge Protection Team) was active yesterday, accelerating the buy programs, which certainly squeezed the shorts that had built up on the heels of the subprime problems, expected topping of the over-leveraged LBO market, and the $US Dollar weakness that is threatening to take out the 80.39 10-year low.

The SPX and $INDU broke out of their 10-week trading ranges yesterday, and this gives traders new levels to work, which means more opportunity. Next Friday is an option expiration, and also has some time symmetry, so that will generate some volatility for traders. The spike yesterday to new highs changes nothing relative to the negative time risk/reward of this current extended bull cycle. Day traders will continue to benefit most from a focus on the technology and energy sectors, just as you did before yesterday's spike to new index cycle highs.

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.