Trade the Price/Time Zones, Not the Emotion
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
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Last week was heavy, with more negative news on housing, credit, liquidity,
and the significant write-downs by the banks in mortgage securities. The
mini-meltdown on Friday put the SPX at -4.0% for the week, which is the 3rd
largest weekly decline this year, versus -4.9% for the week ending 7/27, and
-4.4% for the week ending 3/2. The energy decline accelerated the downside, as SLB opened down -5.9%, at 105.05, on news, and finished -11%, dragging the rest
of the sector down as the Generals and hedge funds ran to the exits at the same
time to take profits. The energy sector decline was on a significant increase
above the average daily volume. SLB had advanced +41.4% from the 8/16 81.26 low
to 114.87 on 10/15/07 in just 41 days. For the institutions, it was a "sell
now, ask questions later." The same was true for some of the multinational
stocks like MMM -8.6%, CAT -5.3%, and HON -3.9%. Their earnings were positive,
but outlooks were less then stellar, so these stocks were sold off on a
significant increase in volume, just as the energy sector was. The institutions,
as usual, crowded the exits and acted like a herd. The energy and multinational
stocks have been leaders, but it is not a profit until you sell it. The $BKX
made new closing lows Friday, and was trading well below its 200-day ema, as are
the $XBD, $TRAN, RTH, XBH (home builders), SMH, and XLY (consumer
discretionary). Without continued energy and multinational stock leadership, it
will put significant pressure on the SPX. On the week, the $BKX led the downside
at -7.2%, OIH -6.7% (-6.2% on Friday), $XBD -6.0% and RTH -5.7%.
NYSE volume expanded Friday to 1.79 billion shares, with the biggest increase
coming from the energy sector, and there was also the option expiration
activity. The SPX had hit the anticipated key price zone levels, which were 1573
and 1578, making a 1576.09 10/11 high, in addition to some longer term time
symmetry. The initial decline has hit the .236 retracement zone to 1370.60 (8/16
low), which is 1527.59 versus the 1526 intraday low last Wednesday. The bounce
for this level was only to 1542.79, and has now made the lower low on Friday to
1500.26, versus the 1498 .382 retracement. Also weighing on the market last week
was crude oil trading above $90, and the $US Dollar index making new lows
(again) to 77.41, which is a major threat to a significant meltdown similar to
1987. In 1987 Treasury Secretary James Baker said shortly before the crash that
the US would let the Dollar decline to improve the trade balance. That obviously
didn’t work, because the crash occurred the following Monday. The global markets
have sold off following the mini-fear day on Friday, and as I complete this at
6:50 AM ET, the SPX futures are -12.5 and $INDU futures -124, so put your
helmets on, as the price action might get ugly. There is initial price symmetry
at the 1475-1470 zone and 1461-1459. My guess is that the PPT met on Friday, and
is on the phones this morning in case things get out of hand.
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.
Have a good trading day,
Kevin Haggerty