Read Larry Connors' blog – Short Term Trading Strategies
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
The market action last week was poor relative to any seasonal bias as the SPX finished the week at 872.80, or -1.7, while the INDU was -0.7, and the QQQQ was -2.2. The uvol/dvol ratio last week was only 0.62, versus the previous four weeks at 1.12, 1.22, 1.24, and 4.2 for the week ending 11/28, and reversal from the 11/21/08 low of 741. NYSE volume was also very light last week, with the early NYSE close on Wednesday, and then only 517mm shs on Friday, following Christmas day.
The weakness carried over on Monday with the SPX and INDU both declining -0.4 to 869.42, and 8484 respectively, as the military action in Gaza heated up. This sent crude oil up +6.0% ($WTIC) while the energy and gold stocks led the upside with the OIH at +2.5, XLE at +2.2, and HUI at +3.0. NYSE volume was light again at 877mm shs, and with the Holiday on Thursday I expect many investors will be taking a long weekend, so day traders should not expect much action.
Volatility has declined significantly over the past few weeks, and the SPX is locked in a 15 bar trading range, and tested it again yesterday with an 857.07 intraday low, before bouncing up to the 869.42 close. It is ST-O/S on a momentum basis, and the next 5 trading days have an upside bias, so it should not be a surprise if the next move is up. There is no key price zone in play, so the resolution of the range will be the next market catalyst.
The price and volume action in the first couple of weeks in 2009 will be the key to identifying the sectors that the Generals favor, because that is where the best day trading action will be. I expect they will remain defensive for the early part of 2009, and under-weighted in financials, consumer discretionary, and materials. Look for the big cap global growth stocks to outperform later in 2009 as an indication that the Generals have discounted the recession trough in advance.
It is time to wind down the trading year and evaluate your performance for 2008. You should identify what you do best, and what your biggest weakness is, and where you loss the most, so you can adjust your trading plan for 2009. The "panic of 2008" has been a huge windfall for day traders that understand how to trade the daily extended reversal strategies that we utilize in the trading service, because that is what the last few months has been all about.
The next commentary will be on 1/5/09, so I wish you all a safe and Happy New Year!
Click here to find full details on Kevin's courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.
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