Daytraders kind of market
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1.
The decline from the
SPX 1296 – 1291 and 01/11 – 01/13 time period accelerated to the downside,
closing at 1261.49, -2.0% on the week.. This was in tandem with the
rise in Middle East tensions and the advance in crude oil (CLH6) to a 69.15
intraday high and 68.48 close. INTC took a -11.4% dive on Wednesday, which was
followed by the Iran/Nigeria flap on Thursday, but the market traded that day
like the PPT (Plunge Protection Team) came into the market as the SPX rallied
from a 1277.93 intraday low (minor support 1276) to close at 1285.04. The -1.8%
knife down on Friday saw the SPX hit a 1260.92 intraday low, with the Dow
closing at 10,667, -2.8% on the week and -2.0% on Friday. The QQQQ led the major
indices down on the week at -4.1%, led by INTC and other semis as the SMH
was -4.8%. The BKX was -3.9% and CYC, -3.4%, while the upside was all energy,
with the OIH +6.3% and is +17.8% since 12/30/05. The most short-term oversold
group was the major banks with all of their 5RSI below 15 and most are now
trading below their 200-day EMAs, so this week will test the General’s interest
for sure. The energy stocks are obviously the most overbought, with RSIs above
80. The DIA and XLF have 5RSIs of 16 and 13, while the SPY is 24 and QQQQ, 25.
NYSE volume ballooned to 2.1 billion shares on option expiration Friday, with
1.76 billion shares down for a volume ratio of just 16. This was the most volume
since the 2.08 billion shares on the12/16/05 (Triple Witch) expiration. Breadth
was -1340.
Needless to say the media and Dow 11,000 took a sharp detour as the Dow took out
the 10/13 – 01/11 trendline and closed below the last reaction low of 10,684 on
01/03. The 200-day EMA is just below at 10,601. The SPX closed right at its 50
DEMA zone of 1260.27, with the 200-day EMA down at 1222.75.Â
Traders who took the RST short from the 1296 – 1291 price zone or at end-of-day
entry below 1288.12 should trail stops down, locking in about 20 points
depending on your entry price. Any immediate upside reflex should reach the 1270
– 1276 zone and it should be no surprise to traders if the PPT shows up on the
buy side this week if there is continuing weakness with the Iran/terrorist
activity. The 09/01/05 crude oil (CLH6) 70.70 high is the magnet that will be
taken out, and if that happens there is a clear path to the upper channel line
at 85 – 90. This recent flap in the oil increase was preceded by a surge in
physical delivery in gold–and probably by the bad guys.
Have a good trading day,
Kevin Haggerty