Ignore the Empty Suits on CNBC

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.

In the previous commentary of 10/10 (Strategies and Focus List Stocks), I said that because the market is in a key time period and just below the key price zone (1570-1580), in addition to being extended on a 3-month Standard Deviation basis, coupled with negative momentum divergences, that the highest probability was a downside reversal. The trading service had the anticipated levels in advance (1573, 1578), and were prepared to take action. This was rewarded yesterday with the lucky knife down in the SPX from 1576.09 (Volatility Band zone) to 1546.72, which was the 816 ema (5-minute chart) and also a Volatility Band zone. The SPX reversed to close at 1554.41. You can anticipate and identify high probability zones, but you can't know the duration and extent of a move.

The $INDU was +119 points, then reversed -238 points to a 13950 low, before reversing +65 points to close at 14015. Got to love that volatility. NYSE volume was 1.5 billion shares with the volume ratio 42 and breadth -757. There could be several different institutional reasons for a futures-induced knife down like yesterday, but it certainly wasn't the lame retail sales or JP Morgan downgrades that the empty suits and media were espousing. The SPX was +15% in 38 days to yesterday's 1576.09 intraday high, so most savvy traders did not get caught surprised (or should not have), and it is my guess that there has been more than the usual portfolio insurance selling of futures, or else buying of the leveraged short ETF, like the SDS (SPX) by the institutions and hedge funds to cover their tails during the historical weak month of October.

Those of you who have been reading this "ragsheet" for a period of time know my strong feelings that the PPT has been very active in manipulating our market for quite some time, and is putting the US market on the scale of some of the 3rd world manipulated markets. There was an excellent must-read article in the New York Post yesterday (John Crudell) on the PPT and Federal Reserve regarding the communication and market action around the 8/16 1370.60 SPX low, and 8/17 Fed rate announcement. You can access that article online through the business section. Henry Paulson (Treasury Secretary) refuses to release any minutes of the PPT meetings, despite increasing attempts to get them through the Freedom of Information Act by people like John Crudell (NY Post) and Representative Ron Paul. The PPT will do what it can to prevent any October meltdown, and if there is any more significant selling pressure, they will make every attempt to reverse it into year-end, with the help of the Generals' mark-up. Of course, the 2008 election is also a major factor that you have to consider where the PPT will take significant action on any air pockets to the downside.

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