The Dubai Day Trader Bonus Trade
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.
The Dubai panic lasted one day, and the net result is that the SPX remains in its 14 bar daily chart range, as it finished Friday at 1091.48 or -1.7%, and was +0.4% yesterday to finish Nov at 1095.63, or +0.6%.
The Dubai decline was due primarily to some unwinding of the “carry trade” by short term fast money, and it generated a steep discount opening on the NYSE which was a real bonus for members of the trading service that are familiar with how to trade extended volatility using my volatility band table each day.
The SPY discount opening on Friday was -2.8% on the opening bar to 108.29,which was right on the -3.0 VB (3 STDVs) at 108.31 The trade decision to play for a contra move was a “no brainer” at that -3.0 standard deviation level (STDV), and the SPY ran to 110.32 before reversing to the lower close. The discount opening was accelerated on Friday which had a 1:00PM NYSE close, because the liquidity was thin as many had taken the extra day and made it a long weekend.
The futures were positive about 9 points before the NYSE opening today, and are trading higher after the opening. Today is a key time date and the December seasonal bias is up into year end, so expect the current SPX 14 bar range with the 1113.69 high to be broken to the upside. If for some reason the Dubai fiasco gets legs, the key downside price zone for a seasonal long play is 1072-1060, which has 4 different price symmetry levels. The bottom line is that that bull cycle from the SPX 667 3/6/09 low remains strongly intact until the string of higher highs and higher lows is broken, which is the basic tenet for first grade trading 101.
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