Sell Strength and Buy Mid-October Lows

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 market went flat again yesterday as the SPX closed at 1447.12 versus 1445.50 on Monday, and the Friday close of 1445.94. NYSE volume went quiet at only 1.35 billion shares versus 1.54 billion shares on Monday. The volume ratio was 58 and breadth +723. Yesterday's market action had that "when will the next negative shoe drop?" feel. It won't take much to accelerate the selling again. The reality of the spike off the 1370.60 low Thursday is that the SPX spiked from 1377.64 on the 3:10 bar to close at 1411.27, and then there was a big gap up opening on Friday (discount rate cut), with the SPX hitting 1450.33 on the 9:35 AM bar, closing at 1445.94. The last hour spike on Thursday "just happened" to precede the discount rate cut, and certainly appears to be another "magic move" by the PPT on Thursday.

Daytraders made money on the short side in the major indexes for the past 3 days, using early Trap Door reversals. We have seen what the PPT and programs did on Thursday, and how the premarket futures forced a premium opening on the discount rate on Friday. But have yet to see if the generals actually want to buy stocks and take the SPX higher, which will be a good short opportunity at the key price zones outlined on the Trading Service. Crude oil ($WTIC) closed at 69.57, down from 78.77 14 days ago, and has significant range support at 67.10- 66.75. Even on the downside, the energy stocks provided many long opportunities on intraday reversals using the Trap Door, RST and 1-2-3's in confluence with the Volatility Bands. This is because the implied volatility is so high, and even was before the current subprime volatility spike. The daytrading focus remains the indexes, ETFs, energy stocks, and some multinational big cap program type stocks.

The SPX closed below its 1449.28 200-day ema, and above the 1439.50 233-day ema. Another break below the 233-day ema could accelerate some more selling from the mutual fund timers. The SPX has failed to close above the 200-day ema the last 3 days, so trading through that level would activate some buyers. However, if the premarket SPX futures hold at +9.5 points (8:10 AM EST), it will be another gap opening and non-trade through move, so daytraders will look first to the Trap Door short strategy, depending on the Volatility Band level.

There is some minor time symmetry in early September, but the next primary time period is in mid-October, so be ready for lower lows.

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.

Have a good trading day,
Kevin Haggerty