A Trader's Key Trend Zone

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.

Monday was the lowest volume day, at 1.3 billion shares, since 10/9/06, excluding the half-day after Thanksgiving. There was very little intraday travel range in the major indexes, so traders were quiet. Yesterday NYSE volume expanded a bit to 1.53 billion shares, but the travel range was very trader-friendly, with the SPX knife down from 1413.16 to 1404.80 from 11:30 AM and 12:25 PM. There was a sell-program acceleration knife from 12 PM to 12:25 PM, and that ended the selling. This is Q4 option expiration week, so volatility is expected.

There was a sharp afternoon rebound from the program decline, as the SPX traded up to a 1411.56 close. Daytraders had opportunities on both the short and long sides. This major index short play, if you are familiar with my 1st Hour strategies, was the QQQQ reversal off the 816 ema below 44.05 for a -1.1% decline to 43.56 versus the -1.5 VB at 43.50. The reversal from this VB zone ran +0.9% to 43.95 before closing at 43.80 (see chart). Both the SPX and $INDU reversed above their 816 emas (5-minute chart) in the afternoon and were both good long setups. The 816 ema on the 5-minute chart is the same as a 34-ema on a 120-minute chart, and I consider that my longest intraday trend level. Retracements to that zone on stocks/indexes/ETFs that have Above The Line (ATL) daily chart position provide many excellent daytrading and swingtrading opportunities. One example yesterday was the IBM RST long setup from 816 ema (see chart).

If there was to be any weakness before the expected year-end markup by the generals, it will probably be this week, and maybe into the Monday after expiration. That would leave 8 trading days for the year-end "games." Most big mutual funds have become quasi-index funds, and the SPX is sitting in a 6-day narrow range at cycle highs, so it will only take a buy program or two to accelerate the price to new cycle highs. It will probably take some overt news to alter the year-end up-bias, so daytraders will profit from a concentration in the general's big cap major holdings during the markup.

Have a good trading day,
Kevin Haggerty

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.