Earnings season: 'Midnight Madness'

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. 

It was a good start yesterday for traders of the $SPX as it traded down to the initial minor support level of 1326.70, with a double bottom at 1327.13 and 1327.10, in addition to the 816 EMA (5min chart). This is the same as the 20 EMA on a 120-minute chart, which is my longest intraday trend period as those of you familiar with my "523" trend methodology are aware of. At the low, the $SPX was -4.4 points from the previous 1331.46 close, but the $INDU was obviously pegged by the "handlers", as it was only -3 points when it normally would have been -35 to -40 points with the $SPX at-4.4 points. There was a 123 Close buy entry followed by a 123 HB entry, and the SPX ran +10 points to 1338.31.  If the 1340.28 upper range boundary is taken out, the $SPX should hit 1349 - 1352.

NYSE volume expanded to 1.7 billion shares but the volume ratio was only neutral at 49 and breadth just +132. These are negative internals relative to a new $INDU high and the $SPX close near its recent cycle high. The $INDU is a useless price-weighted index that is most likely being manipulated higher.  In fact, the $INDU, on an inflation-adjusted basis, is at least 20% below the 2000 high (source: The ChartStore.com). The primary market action yesterday was the decline in crude oil below $59, and that of course took the energy stocks with it, as the OIH -4.5% and XLE -3.7%. Gold stocks also took a hit as the $HUI was -6.7%. Those of you familiar with my strategies should be aware of what sets up below 120.05 for the OIH and 50.17 on the XLE.

Both the $SPX 1326.70 and $INDU 11,750 magnets have been taken out so the market is now more vulnerable to downside "air pockets" and 10/5 - 10/7 is a time cluster, so be nimble in your trading and turn off the CNBC volume while you trade. The IWM is a negative divergence to the $SPX/$INDU as it hit a 73.57 high on 9/21 and then made another lower low yesterday of 70.68, closing at 71.22. Earnings season is like "Midnight Madness" for the TV media, as they think it gives them some relevance. Earnings estimates have already been lowered several times, but the media will still be giving you the "better than expected" line to suck the most people into the casino while the lights are dimming

Have a good trading day,

Kevin Haggerty