Trading Volatility and Key Time Zones

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.

The price action in the major indexes Tuesday was not trader-friendly, as the SPX was almost unchanged at 1431.90 (+.08%) with a daily range of only 5.3 points. The SPX had advanced for 3 straight days, while the QQQQ and $COMPX were each up 5 days in succession, so traders had no edge. The $INDU was +0.2% to 12583. The market continues to trade like all bad news is good news.

NYSE volume was 1.5 billion shares and the internals neutral, with the volume ratio 49 and breadth just +21, so it doesn't get much flatter than that. The obvious leadership into yesterday year-to-date has been the brokers ($XBD +6.2%), biotechs (IBB +4.6%) and technology with the QQQQ +5% and SMH (semis) +4.3%. January has a positive technology bias (especially semiconductors) into the first half of the month, so that is on schedule. The SMH was -1.1%, as Deutsche Bank downgraded KLAC, LRCX, and put a sell on NVLS. They did this in front of the Intel earnings yesterday, which was -4.0% last I looked during after-hours trading. I guess that analyst had a good read on what Intel would report. Crude oil took another hit yesterday, as the crude oil future (CL0702) was -3.4% to 51.21. The OIH and XLE remained in a 5-day range, which is still in a key price zone, so they are a primary trading focus for daytraders. Interest rates have been rising since 12/1/06, with the $TYX (30-year T-bond yield) advancing from 4.525 to 4.844 yesterday. During the same time, the $US dollar rallied from 82.35 to a 85.40 high on Friday, closing yesterday at 85.07. The 200 dema is 85.66, and 50 dema is 84.40. As is usually the case, gold ($GOLD) declined during this same period from a 655.50 high on 12/1/06 to a 603 low on 1/5/07. It closed at 625.90 yesterday, which tells us to expect $US dollar weakness as it resumes its downtrend, and to look for a rally in the TLT from its 200-233 dema zone of 88.33-88.27. Since 12/1/06, the TLT has declined from 91.80 to an 87.90 low on Friday, closing yesterday at 88.20. As the $US dollar/interest rate/gold relationship reverses, the SPX will weaken, and crude oil will rally from its 3-month -3.0 standard deviation zone where it closed yesterday. The Middle East "gang" will not let crude oil slide much more, and you can probably expect some saber rattling to help it reverse from the -3.0 standard deviation zone. The $WTIC (light crude continuous-contract EOD) closed at 51.96, and the rally will most likely take it to current resistance in the 58 zone.

There will be some trading volatility this week, as there are several key time dates, but they are not as significant as the time periods in mid-February and March. The short zones for the SPX are outlined in the trading service.

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.