The name of the game into month end
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1
In Friday’s commentary
I said that energy stocks were in a primary focus zone and to make
them the priority daytrading sector and also for short term trading positions.
Including Friday the OIH is +7.9% close-to-close
and the XLE +6.8% in the last three days. Friday was the 21st trading day from
the XLE 54.65 high (09/22/05) and Friday’s 44.94 low was at the 200-day
EMA level and .618 retracement zone (44.20) to the 05/16/05 37.94 low, which was
also to the 200-day EMA.
Energy was the leading sector again yesterday
with the OIH +3.1% and XLE +2.1% as crude oil (CLZ5) was +3.5% on the day. Gold
also advanced for the third straight day with the XAU +1.6% and is now +6.4%
over this same three day period. The semiconductors led the red sectors with the
SMH -2.2%, followed by the RTH -1.4%. NYSE volume expanded some to 1.71 billion
shares with the volume ratio 38 and breadth 723.
For SPX traders (futures/SPY) yesterday
completed the best five days of trading in quite some time. The SPX traded to
major resistance (1201)Â again yesterday with a 1201.30 intraday high on
the 10:30AM bar. The short reversal entry declined to 1189.55 then reversed
above the 1190.50 233-day EMA and the position was covered. Entry was below
1200.29 so take a report on over +9.5 points. The SPX got the same upside jiggle
as Friday of about 5 points in the last half hour, so the game continues (see
chart).
For Monday’s big move with the SPX +1.7% gain on
lower volume of 1.64 billion shares, the media’s reason was the new head of the
Federal Reserve, Bernanke. I don’t think there are that many naive professionals
that believe that one. There were many things going on coming into Monday, such
as the hurricane, pending Fed chairman appointment, potential political
indictments this week, and most important, the fact that October is year-end for
some of the major mutual funds. I would expect the PPT team was active and
some shorts were run in by some aggressive mutual fund activity into month end.
We can’t know for sure about the PPT, but doesn’t it strike you odd that every
single time there is some significantly damaging news the market makes a sharp
“out of nowhere” advance? In the end it won’t help, because the market will go
much lower before the next bear cycle bottoms.
The index proxies will be the key daytrading
focus into month end and we will back off the energy stocks after the sharp
three day gains. If you carry a short-term energy position over make sure your
stops are tight and well above breakeven. The name of the game into month end is
to not give back any of the excellent daytrading gains since the SPX 1168.20
low.
Have a good trading day
Kevin Haggerty
