1st Hour Reversal Strategies, Part 2
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 SPX took out the 769 10/10/02 bear market low yesterday. Based on the 1576 top and yesterday’s 748 low, it is -52.5% in 406 calendar days, which makes it the deepest post world war 2 bear market, surpassing the 3/24/00-10/10/02 -50.5%, and the 1//11/73-10/4/74 -49.9% bear market declines.
It is certainly the most intense as the 2002 low was made in 930 CD’s while the 1974 bear market low took 631 CD’s. The average bear market decline since the 1947 low is 359 CD’s and -28% for the SPX.
The SPX went out at 752.44 yesterday on NYSE volume of 2.23 bill shs with 2.2 bill shs down, while breadth was -2620. It declined -6.7% and was -6.1% the previous day on only 1.63 bill shs. For both days most of the decline was in the last 45 minutes starting each day on the 3:15 PM EST bar. On Wednesday it declined -3.1% in the last 45 minutes, and yesterday it was -4.1%. However, for the day traders familiar with my 1st hour trading strategies both days were bull markets.
In the last commentary I showed you the SPY 123C morning reversal, and today I have included the SPY and XLE 1st hour reversals from 11/19, and the SPY and OIH reversals from yesterday. They are all specific strategy trade setups that the Trading Service members work with each day when trading the major indexes, ETFs, and individual stocks. These strategies are also included in the seminar and different trading modules.
Figure 1: SPY (11/19) Chart
Figure 2: XLE (11/19) Chart
Figure 3: SPY (11/20) Chart
Figure 4: OIH (11/20) Chart
The SPY short reversal on Wednesday was a 123 Lower Top, and the XLE was the RST strategy. Yesterday, the SPY traded down to 77.92 on the 10:15 AM EST bar which set up the Trap Door reversal entry above 78.42, and it had symmetry with the -1.0 and -1.28 Volatility Bands. Crude oil traded below $50 yesterday and the energy sector declined significantly in the opening period. The OIH was -10.9% to 71.15 on the 10:15 AM EST bar from the previous close and was below the -2.0 VB 71.66, so it was a very high probability Trap Door setup with entry above 71.77. All four trades made excellent contra moves, and it just depended on how you managed the trades as to how well you did.
There is nothing positive in the news, Paulson and Congress have spooked the market the last few days, and the SPX has taken out the 2002 magnet 769 low, so the probability is high for a sharp reversal. Next week is month end, but the market is closed Thursday, and it is an early close (1:00PM) on Friday, so you can expect some more significant volatility next week.
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.