Trading the Strategies in the Game
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
The Generals were expected to take the market higher into month end barring overt news, and that is what they have done so far, with next Monday being month end. Yesterday was a new rally high close at 1030.98 (+0.3), and as of 7:40 AM this morning the SPX futures are +6.0 points, so maybe the Generals will push higher today, but at worst, they will prevent any sharp decline until after month end as the market enters the Sept/Oct “death zone”.
NYSE volume was +1.3 bill shs yesterday, with the volume ratio 68, and breadth just +240, which indicates there was portfolio adjusting on both the buy, and sell side. The USD was -0.7 to 78.06, and crude oil finished +1.8% to 72.70, so once again day traders capitalized on this intermarket correlation where the declining dollar gives strength to commodities, and the SPX advances.
It is a “game”, but day traders will continue to win big playing the correlation until it changes. However, the entire market is a “casino” anyway, so there is always a game to play if you are able to recognize it, and that is what we do in the Trading Service.
I have included the SPX and USO 5-minute charts to highlight yesterday’s SPX strategy setups and trades, which points out how you can trade off  the USO price action as the USD was trading down.
SPX 5-minute Chart
USO 5-minute Chart
The SPX made a 1016.20 low on the 10:10 AM outside reversal signal bar, and there was symmetry with the -1.0 VB at 1016.50, and the 1014 .382RT to 1576 from 667, so the Trap Door strategy was in play with entry above 1018.21. However, it was also an RST strategy setup, which is highlighted in green, so it was a very high probability trade decision.
If for some reason you didn’t take the RST/TD setup then you got another opportunity with the 123 Higher Bottom setup (blue) after the 1016.63 low, with entry above 1017.44, followed by the 123 trend entry above 1019.58. Notice how the USO and SPX traded in concert starting on the 11:25 AM bar when the USO broke out of its range above 36.36. This was followed by the ledge B/O on the 11:55 AM bar, and the Flag B/O on the 1:30 PM bar. The SPX traded up to 1033.33 following the last Ledge B/O above 1029.40, and that was the RST 6 point, so traders exited and said thank you very much to the Generals mark up, and the USD decline/crude oil advance. However, we will be back again today looking for another “game”.
Have a good trading day!
Click here to find full details on Kevin’s courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.