SPX daytraders buy weakness and sell strength
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.
Minor support remains in place for
both the SPX (1246) and Dow (10,700) after the
previous two down weeks. The Dow, after a +7.9% advance to 10,960 (11/29) off
the 10/13, 10,156 low, declined to 10,730 (-2.1%), closing on Friday at 10,779,
-0.9% on the week (see chart). The SPX has made two trips to the 1246 minor
support zone, The first was to 1249 following the 11/23 1271 high and the second
to 1251 (12/8) after the 1273 high (12/6). It closed Friday at 1259.37, -0.4%
for the week. Any break of support early this week can find the 1235 -1230
level. Both tests of SPX minor support have held the 20-day EMA, now 1250.58.
The 50-day EMA is down at 1234. For the Dow, that would be 10,774 and the 50-day
EMA at 10,650. The QQQQ remains above its 20-day EMA of 41.33, closing Friday at
41.71, +0.4% and -0.9% on the week.
Daytraders can look for long intraday setups on any decline early this week to
the above-mentioned levels because entry would be at the lowest common
denominator with close stops. Contrary to the retracement in the major indexes,
the OIH and GLD (gold proxy) remain in strong upside advances. The long-term
bond yields remain above the 200-day EMA, while the TLT closed at 89.54, below
its 200-day EMA of 90.55. More importantly, real interest rates are at extreme
lows relative to historical average, and that is not a positive for the equity
markets into 2006 (10 year Treasury rate vs. Fed funds rate.)Â
www.thechartstore.com has come
excellent charts this week on real interest rates relative to past recessions
and the SPX, which tells the story.
The early futures are to the upside, with the S&Ps +4.60, Dow
+43 and Nasdaq +6.00 at 7:50 AM, so on a gap opening the SPY 126.90 and 127.25
levels are the first Trap Door zones where initial contra moves might occur.
Have a good trading day,
Kevin Haggerty
