The 1st Hour Trading Edge

The major indexes made new highs again yesterday and NYSE volume continued to
decline to 1.32 billion shares.  The volume has been below 1.4 billion
shares 4 of the last 6 days.  The volume ratio is 61 and breadth is +786 as
a smaller universe of big cap stocks continue to drive the SPX higher.  The
market was short term overbought starting the week with the 4ma of the volume
ratio and breadth at 66 and +810.  The retail sector continues its positive
February/March bias led by focus list stocks like JWN, JCP, TGT, KSS, and ANF. 
WMT, which has been a nothing stock since last October, had a news earnings gap
advancing +3.7% and was the primary mover in the $INDU yesterday.

The major indexes opened to the downside yesterday and then set up the First
Hour Reversal Strategies.  Daytraders capitalized on the index proxy Trap
Door Reversal from the -1.0 Volatility Band levels and 480 dema.  The
extent of the reversal following options expiration was a surprise, but the
contra move from the -1.0 Volatility Band was certainly not a surprise as it is
a very high probability strategy.  The SPY closed Friday at 145.76 and
traded down yesterday to 145.06 on the 10:05 AM bar.  The -1.0 volatility
band was 145.05 with entry above 145.15 on the 10:10 AM bar. The SPY traded up
146.20 before closing at 146.04.  The obvious inefficiencies of the
electronic market opening process will only enhance the already high probability
First Hour Reversal Strategies.

The market remains short term overbought with the SPX having bounced off the
1431.44 low last Monday and closing yesterday at 1459.70.  There is
obviously no edge chasing continuation new highs from yesterday’s advance, but
index proxy short setups can be taken today by daytraders should there be first
hour strength to Volatility Band levels.  Daytraders must continue to take
advantage of any extended volatility especially in the first hour.