The bull cycle highs are in
Kevin Haggerty is a full-time professional trader who was
head of trading for Fidelity Capital Markets for seven years. Would you like
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more) for the next day’s trading?
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The fact that the market declined
after the Memorial Day weekend is not a surprise, especially
after three straight up-days (SPX +1.9%) from 1245.34 to the 1280.16 close on
Friday. However, the extent of yesterday’s decline did surprise many market
participants. NYSE volume was not heavy at 1.55 billion shares but it was all
one-sided, with a volume ratio of just 11
and breadth -1789. All of the primary sectors
were down as much or more than the SPX. The Brokers
(
XBD |
Quote |
Chart |
News |
PowerRating) led the downside
at -2.9% following a +4.4% move on Thursday and Friday. The
(
IBB |
Quote |
Chart |
News |
PowerRating) was -2.4%
and
(
RTH |
Quote |
Chart |
News |
PowerRating) -2.0%, while the Semiconductors continued their decline, with the
(
SMH |
Quote |
Chart |
News |
PowerRating) -1.7%. The SMH was -2.7% last week and remains -7.5% below its
200-day EMA of 36.34. The $COMPX did not re-cross above its 2231 200-day EMA
last week, closing yesterday at 2165, -2.1%, while the SPX was -1.6% to 1259.87,
and the $INDU -1.6% to 11,094. The previous lows for the SPX and Dow are 1245.34
and 11,030. Yesterday’s decline had the SPX re-crossing its 200-day EMA of 1263,
closing at 1259.84, but still above its 233-day EMA of 1256.24. The SPY bull
cycle high is 132.80 and it closed Friday at 128.38, which is the .50
retracement from last week’s 124.76 low. It closed at 126.10 yesterday with the
200-day EMA at 126.38, so that is the immediate upside focus. The Generals will
probably step in and buy some stock on weakness today, if only because it is the
last day of May and then maybe again for the first couple of days in June, with
allocation or new money put to work.
In spite of
yesterday’s decline, traders made some money on reversals from the -1.5 and -2.0
volatility band zones in some of the commodity sector stocks, which had declined
sharply. The energy stocks were up early, but after they declined from their
morning highs, traders also capitalized on some quick volatility band reversals.
The information on how to trade volatility bands is presented in the module
"How
To Trade Major First-Hour Reversals For Rapid Gains."
Daytraders will benefit most from concentrating on energy, gold, copper, steel,
brokerage, defense and certain industrial stocks.
The QQQQ, SMH
and $COMPX have made their bull cycle highs, in my opinion, as their long-term
moving averages have rolled over and are now declining. The SPX and Dow will
probably make a better re-test of their bull cycle highs, and maybe one of them
will make a marginal new high. The next big long-term market buying opportunity
will probably occur in the fourth quarter of 2006 through March 2007.
Have a good
trading day,
Kevin Haggerty