Technology Sector Seasonality in Play
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 continued holiday trading, NYSE volume was light at 1.38 billion shares,
and liquidity thin, as the SPX finished almost unchanged at 1525.40 (+.03%) as
did the $INDU at 13566 (-.08%). The volume ratio was neutral at 50 and breadth
-293, due in part to the rise in interest rates, as the TLT was -1.2%. There is
a positive seasonal technology stock bias in play, as the QQQQ leads the SPX and
$INDU on this rally, and has broken out of its recent trading range, while the
SPX and $INDU are still below their cycle highs and in their current ranges
below 1540.56 and 13692. The QQQQ has rallied from July lows 3 of the past 4
years, on 7/18/06, 7/07/05, 8/16/04, 7/1/03 and broke out of its current range
on 7/72 above 47.92, closing yesterday at 48.66. The Trading Service focus list
of stocks reflected the anticipation of this technology seasonality, and we will
ride the train until it stops. Energy also continues to be a key focus, and the
best individual sector for daytraders, and also the lead sector for the
Generals. Crude oil ($WTIC) closed at a new high yesterday (71.81) after
breaking out of a 5-month trading range with a 67.10 high. The $US Dollar
matched its May 81.25 low yesterday before closing at 81.54. The 10-year low is
80.39, so this is a very dangerous zone for the $US Dollar, and breaking through
the lows could be a significant catalyst for a replay of some degree of a 1987
sharp decline. My guess is that the Plunge Protection Team (PPT) is already on
stand-by to soften any selloff, should that develop.
The travel range yesterday for the major indexes like the SPX, $INDU and IWM
was a positive for daytraders, as they went trend down in the morning and trend
up in the afternoon. The QQQQ consolidated in the morning, but had a strong
afternoon trend up. The initial SPX short was an RST that declined 7.6 points to
1517.72 from 1525.36. There was Fib retracement symmetry in this zone, with both
the 1493.61 and 1484.18 significant lows last week, so that traders had the
decision to also take a long entry after the short exit. The SPX traded up to
1525.40 close. At worst, traders familiar with the strategy traded one side or
the other, or maybe both, so it was a very positive day. After a sharp up
opening, the XLE and OIH dropped like a knife to their -1.0 Volatility Band
zones, and traders were able to take advantage of this strategy reversal. The
XLE traded from the 70.00 entry to a 70.72 high before closing at 70.58, while
the OIH ran from 177.15 to 179.28 and closed at 179.12. There were similar
reversal in the OIH/XLE component stocks. Most of the focus list stocks like ADI,
NVDA, LLTC, IBM, to name a few, had defined strategy setups, as did ESRX and
HON. We have capitalized on the SPX in the 1535-1540 key price zone, as well as
the bottom of the range below 1500, and that will continue until this 8-week
trading range is resolved. Tech stocks and energy are the primary sector
daytrading focus in addition to the other ATL (Above The Line) stocks with good
daily chart positions. This list has narrowed considerably on the current bounce
off the 1482.18 low last week.
The current rolling over the LBO market and $US Dollar weakness are
significant potential downside market catalysts, in addition to the continued
unraveling of the subprime market securities. Time, which is the major market
determinant, is obviously against this bull cycle, as it is already the longest
period between market tops in over 50 years. Hedge your long-term investments
accordingly.
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.
