Friday Belonged To Daytraders

The market action for the first week in 2005 was weak, with the SPX ($SPX.X | Quote | Chart | News | PowerRating) -1.9% year-to-date, closing at 1186.19 on Friday, -0.1% on the day. The Dow ($INDU | Quote | Chart | News | PowerRating) was -0.2% on Friday to 10,604, while the Nasdaq ($COMPQ | Quote | Chart | News | PowerRating) was off a point again to 2089. The (QQQQ | Quote | Chart | News | PowerRating) was +0.5%, led by the semis with the (SMH | Quote | Chart | News | PowerRating) +0.9%. On the week, the QQQQ was -3.4% and Nasdaq -4.1%. This negative week for the major indices followed a significant rally off the August and then 10/25 lows.

NYSE volume was 1.47 billion with the volume ratio 37 and the 4 MA still 34. On the week, the up-volume average was 486 million vs. 1.08 billion down, or .45. Advances averaged just +1189 on the week, with declines -2140.

The big losers in the sectors for the week were the semis, with the SMH -5.8%, OIH -3.9%, XBD -3.0% and CYC - 2.7%. The brokers and cyclicals declined from their rally highs into year-end, but still remain certainly "Above the Line," which is important for daytraders' stock selection.

The SPX closed Friday down less than 2 points and was what some say was a choppy day. This was simply not the case for daytraders utilizing my Flip Top and RST strategies because the travel range was excellent, from 1191.30 down to 1182.11 up to 1192.20, then down to 1185.71, closing at 1186.19. That means, for all of you daytraders, the travel range was 25.8 points vs. the daily range which was 10.1 points. The order of trades was a Flip Top sell below SPX 1188.12, RST buy above 1183.07, then an RST sell below 1190.25. If you use the strategy-defined entries on all three trades, you were in the game playing for 18.2 tradable points. If you played all three trades, great, but the one you definitely should not have missed was the RST buy entry after the 1182.11 low which was right at our 1180 - 1181 interest zone.

The SMH hit 31.12, right at the top of the 31 - 29 key price zone and gave you an RST buy entry above 31.20 on the 10:45 a.m. ET bar. The trade ran +2.3% from entry to the intraday high of 31.92 before fading to the 31.48 close. If you prefer the individual stocks to the SMH HOLDR, you had, for example, an excellent 1,2,3 Higher Bottom entry in KLAC above 42.55 which advanced +2.4% from entry before reversing to the 42.97 close.

So, I ask you, what do you say to someone who asks you how did you like the market action on Friday? Correct. That is why it is not worth taking the time to respond if you are daytrading because they look at you with a perplexed look because the SPX finished off less than 2 points and you have told them you loved the market action. It is about travel range for the daytrader, in addition to understanding the simple, but successful strategies you have learned (I hope).

In order to take out the 1217.90 rally high, some more downside is best, but it will get taken out and the fifth wave will move higher. The long anticipated resistance zone after 1161 was 1220 - 1254, so this weakness is started right at the beginning of that resistance. Longer-term trading stops on the SPX remain at about -5.2% from here. No e-mails on why, please.

Have a good trading day,

Kevin Haggerty