Trading with the Odds On Your Side
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.
Commentary for 5/24/12
The SPX made a 1291.98 low in the “Key Price and Time Zone” on 5/18/12 [last commentary] and closed that day at 1295.22. The .382 RT to the 1074.77 low is 1289.59, and the .50RT to the 11/25/12 1158.66 low is 1290.55. The SPX daily chart 5 RSI was 4.99 on 5/18, which is the most O/S since the 8/8/11 1119.28 low with a 4.04 RSI, which was followed by an 1172.53 close the next day. However, the price action after that was erratic, but the SPX held that 8/8/11 low until the 1230.71 high [8/31/11] and then made the 1074.75 10/4/11 low.
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The SPX 5 RSI was never below 5.0 in the 2008 Panic, or the 2009 bear market low. Fast forward to this week and the SPX has bounced off the 1291.98 low to a 1328.49 intra-day high on Tues, but closed at 1316.63. It then made a 1296.53 low yesterday on another unconfirmed jawboning Greece rumor, which was followed by the SPX 2:30PM vertical spike on another non-factual Euro Zone report regarding the possible use of Euro Bonds etc. and the SPX closed at 1318.86.
The SPX closed at 1295.22 in the Key Price and Time zone [1314-1290] on 5/18/12 and then the opening range the next day was 1301.02-1296. The range B/O went trend up for an excellent day trade. There was price and time symmetry in an extremely S/T O/S market, which was also O/S on an intermediate term basis [weekly 5 RSI] in addition to a basic contracted volatility day trading strategy.
I included the NOV daily chart to give you another example of price and time symmetry on 5/18/12, in addition to the day trading setup the next trading day. The stock had price symmetry in that it was a .618RT to the 10/4/12 47.81 low, and at the 610 EMA [Fib]. Also, it was extremely O/S as indicated by the 5 RSI, so it was a key trading plan focus for 11/21/12. The stock opened to the upside, formed a 1st CBO pattern, and the B/O entry above 64.80 went trend up all day to a 67.36 intra-day high with no real contra moves, so traders went home happy.
The SPX 3 Month Standard Deviation chart [5/18/12] from the Trading Service is also included which outlines the SPX.382RT and 13 day [Fib] decline to that 1291.98 low, which was also extended to the -3.0 STDV Band, so the probability for a reversal was high.
There was also long term Fib Ratio symmetry on 5/18/1 Fri which was the 1.5 Fib Extension of the last two major Bear Market lows, so it was a significant cluster of price and time symmetry to precede the bounce. The calculation for the Fib Time ratio symmetry is outlined below.
10/2/02 [769] – 3/6/09 [667 = 2339 CD]
1.5 x 2339 = 3568 CD
10/10/02 + 3568 CD = 5/18/12
You can pin point and anticipate high probability reversal or acceleration zones, but you can`t know the extent of the move.
You can go to www.geometricmarkets.com and download for free 6 of my calculators that I use to measure price and time symmetry. The brand new 20+ page manual “Markets Trade with Geometric Symmety” is also available for purchase.
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