Traders will adjust to new market dynamics
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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In the November 3rd commentary we said that the short-term
technicals were favorable for another one of those “mystery” futures-induced
moves in front of the Tuesday elections, and then like magic, the SPX trades up
from Friday’s 1364.30 close to an intraday high of 1381.40 on Monday before a
1379.66 close. On Tuesday, “they” pushed the SPX to 1387 in the first
hour, and then it went sideways before fading a bit to 1382.84 (-0.2) close
yesterday. The effort to push price was successful in front of the
election, but it didn’t help the results, as the house was lost and most likely
the Senate. This will obviously change the market dynamics, as the
rhetoric heats up, but traders don’t make money predicting, only trading it.
The longer term timing for a cycle low remains the same, as I mentioned over a
year ago, which is October 2006-March 2007. This time zone has lots of
other symmetry, and it is also the average cycle end zone for the past 57 years.
No, this time is not different, just like it wasn’t in 2000 when 80% of the
younger brokerage firm strategist and economists were proclaiming a new era and
the end of the business cycle as we knew it. I guess they changed their
minds by October 2002. Some of those same economists were probably part of
the survey in 2000, when 95% said there would be no recession (Sorry to
disappoint you). The market and sector action on Tuesday was not very relevant,
as the election results will now change individual sector perception, though as
traders we will make the necessary adjustments. My strategies remain the
same, and I expect more two-way volatility. Many equity-oriented hedge
funds will get even more short-term oriented than they are already, which will
accelerate volatility.
Most of my strategies are based on a core framework, that
includes trading extended and contracted volatility. In doing this, I use
9 primary tools that determine the probability of a successful transaction.
These tools can also be utilized with any of your own personal strategies,
regardless of whether or not you are a position trader, day trader, portfolio
manager, or longer-term investors (if there is such an investor). The 9
tools are outlined in Trading With the
Generals IV and
Sequence Trading Modules. If you are a trader that goes home flat
everyday, your game plan remains the same, and you should continue to do so
until new trends develop.
Have a good trading day,
Kevin Haggerty
Check out Kevin’s
strategies and more in the
1st Hour Reversals Module,
Sequence Trading Module,
Trading With The Generals 2004 and the
1-2-3 Trading Module.