Look for reversal strategies this week
Kevin Haggerty is a full-time professional trader who was
head of trading for Fidelity Capital Markets for seven years. Would you like
Kevin to alert you of opportunities in stocks, the SPYs, QQQQs (and
more) for the next day’s trading?
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Trading Service or call 888-484-8220 ext. 1.
The market statistics
for Thursday indicated a slow, neutral day. NYSE volume declined to
1.23 billion shares, volume ratio 54, and breadth -296. The SPX closed up
a point to 1289.12 and the Dow +8 points to 11,138. However, for
who
continue to focus on commodity-related stocks (last
commentary 04/03/06) it was the best trading day of the week. There were
Trap Doors for the OIH/XLE that ran +2.5% and +1.8% from entry. Both trades
were from the -1.0 volatility band zone. Many of the component stocks like
(
RIG |
Quote |
Chart |
News |
PowerRating) and
(
NE |
Quote |
Chart |
News |
PowerRating) had the same setups. Other commodity-related stocks like
(
FCX |
Quote |
Chart |
News |
PowerRating),
(
NEM |
Quote |
Chart |
News |
PowerRating) and
(
NUE |
Quote |
Chart |
News |
PowerRating) had Trap Doors which ran +3.4%, +2.5% and +3.2% from
entry. That is excellent volatility for
as opposed to being limited
to, say, the SPX, where the SPY Trap Door contra move advanced from the 128.55
entry to 129.25 (+0.7%).
In the 04/03/06 commentary I said that the SPX
1310.88 – 1291.94 range would not hold after Q1 ended, especially with the key
04/05 – 04/12 time period approaching. The SPX hit its current bull cycle 1314
high on 04/07, declining to 1282.45 on 4/12. The 1314 rally high was in an
anticipated price zone with much symmetry. The key price and time zones are
outlined daily in the professional trading service.
Earnings season starts this week and there are
economic reports like the PPI, CPI, housing starts, not to mention that it is
also an option expiration week. This all means volatility and knee-jerk
reactions, which is exactly what traders want, provided you understand and use
my reversal strategies. The media will be spinning the better-than-expected
earnings but will never say that the earnings estimates had been previously
reduced. The initial S&P 500 estimated earnings for 2006 was +12.5% and last
week was reduced to +10.5%. There have been many bear markets with price
declining and earnings rising, so don’t get hung up on the earnings.
Interest rates, gold, and other commodities have
all made new highs since the last commentary and the Fed has been printing money
at a very brisk pace. They talk inflation-tough, make token quarter-point
increases and still print the money, which tells me they are worried about
something on the near horizon and/or are trying to hold the equity market up
through the November mid-term elections. They will attempt to make it a
soft landing like 1998. They will also continue to stabilize the markets as we
see every time there is significant geopolitical negative news. It doesn’t take
much futures buying by the gang to accelerate the buy programs, which have
averaged 58.7% of NYSE volume so far in 2006. Sooner or later you must pay
the fiddler, and that is something that will always remain the same.
Have a good trading day,
Kevin Haggerty