No Trading Edge After the Mark-Up

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 strong month-end markup and first few days of February, new money. This was helped in part by the FOMC's "all is well with the economy" statement, that just happened to coincide with the President's speech on the economy. The Fed was certainly looking through a different hour glass than they did 4 weeks ago. The SPX went out at a new closing high of 1448.39 +0.2% on the day and +1.9% for the week. The QQQQ, which has some weekly negative momentum divergences, closed at 44.16, +1.3% for the week. The internals were neutral on Friday, with the volume ratio 56 and breadth +535, but the 4 MA's are short-term overbought with the volume ratio 69 and breadth +1241. NYSE volume on Friday was 1.43 billion shares, which was the low for the week, and the daily range on Friday was just 4.8 points.

In the sectors, energy continued its rally with the OIH up for the third week in a row, and is +10.8% the past 15 days, versus the SPX, with all the hype, just +1.7% the same period. Our primary energy focus was rewarded, as it is most often from key price and time zones, which can be anticipated. When you put yourself in the highest probability situations all the time, your chances of beating the "casino" are significant. The light crude oil contract ($WTIC) closed Friday at 59.02, which is +15.7% off the 1/17/07 51.03 low. The initial resistance is 58, with the 200 dema at 62.64. There was some strange trading in the $TRAN last week (+6.2%), as it went from 4788 to a 5032 high in 3 days from 1/31-2/2. It closed Friday on 5006.89. This was in spite of the sharp increase in crude oil. The $TRAN had declined from from 4861 to 4687 as crude oil reversed off its 51.03 1/17/07 low. One component of the index, CHRW, was +23.2% the past 3 days, on a positive earnings surprise and upgrade. Once again, the herd chases and the shorts cover. The price action of the $TRAN is significant right here to those who follow the Dow Theory, and a close and hold above 5014 will give them their confirmation of the $INDU cycle high.

The QQQQ is the weakest of the major indexes, and has some obvious weekly negative momentum divergences, as do the $INDU and SPX. I have included the QQQQ weekly chart, and you should also review the $INDU and SPX weekly charts with the same indicators. From mid-February through most of March there are some key time periods, and volatility should increase significantly from the 52-week lows where it is currently trading. The SPX is up 4 straight days, so daytraders have no edge right here, until some of last week's markup is worked off.

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.