Morning 'air pocket' triggers buy strategies

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.

Traders got some needed intra-day volatility yesterday from the economic and earnings reports. The gap down openings and morning trend down put the SPY, DIA, and QQQQ at the -1.5 VB levels, and .50 retracement levels to previous lows for the SPY and DIA. This activated the buy strategies for the ensuing contra move, where the DIA traded from 118.87 to 119.75 and the SPY from 135.67 to 136.70 before closing at 136.41. It was a good day in the trader's office. The modules to learn the various strategies are listed below. Once again, there was an uptrend that started at the noon hour, and the $INDU reversed +63 points from 11897 to close at 11950. The "gang" is determined to take out that 12000 magnet, regardless of any negative news.

NYSE volume was 1.52 billion shares, and in spite of the afternoon rally, the volume ratio was just 30 and breadth -791. The downside was led by the semis, with the SMH -2.3%, mostly due to the Intel earnings report. I assume "they" will try to spin it the other way today. The SPX finished at 1364.26 (-0.4%) and the $INDU (-0.3%) to 11950. The QQQQ's, hurt by the semis, was -1.1%. Energy stocks reversed after 3 straight up days. The OIH and XLE were each -1.1% after runs of 7.1% and 6.1% the previous days. This midterm rally has coincided with falling oil prices, and this corner thinks that oil will break $70 before it breaks $50. In addition to more recession-type news, it is not a good combination for the market.

There are many other significant technical negative divergences in this market that will probably not come into play until the midterm election rally game is over, when maybe Nancy Pelosi is the Speaker of the House, which seems to be the higher probability right now. From an investor's standpoint, the market remains over-valued, over-bought and over-hyped with the worst risk/reward since 2000. It continues to be a trader's market only. Since 2000, the buy and hold investor has done better at short term money-market instruments, and that will remain so for the near future.

Have a good trading day,
Kevin

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.