Discount Openings Are a Trader’s Windfall
Kevin Haggerty is a full-time
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The SPX futures were down about -15 points
pre-9:30 AM New York opening, and with the almost all electronic opening
process, the result was another meltdown in the first 15 minutes before a "V"
reversal from the 9:45 AM 1380.87 intraday low to a 1409.86 intraday high,
closing at 1403.14. Of course, the retail investors with market orders to
sell on the open got their clocks cleaned once again in the first 15 minutes.
With the lack of stabilization in the electronic opening process, we will
continue to see unusual discount and premium openings. NYSE volume was
heavy again at 2.23 billion shares, as portfolio managers adjust their
weightings and change their asset allocation in addition to legitimate market
selling. In spite of the 9:45 AM reversal, the volume ratio finished a
weak 37 with breadth -662. The sectors were all red except energy, with
the OIH +0.3%. Gold stocks and semis led the downside, with the $HUI -1.6%
and SMH -0.9%.
The SPX took out 3 previous key swing point lows
from the 1461.57 high on 2/22/07, which are 1431.44, 1416.96 and 1403.97.
These levels become initial focus lines on the rally. The SPX is -5.5% in
5 days, and the 5 RSI hit 9.01 on Tuesday, closing yesterday at 19.44, so it is
obviously into the short-term oversold zone, and the first time below 20 since
the 6/14/06 1219.29 low where it all started, following a -8.1% decline from
1326.70, which is the .707 retracement zone to 1553 from 769 (1323). The
Wave 5 bull leg of the current cycle continues to mirror the unsustained angled
advance in the final move to the 8/25/87 top. I outlined the initial start
of that bear market crash in the previous commentary. It was -8.6% in 9
days, from 337.88 to 308.56, followed by a +6.6% rally in 18 days to make the
1-2-3 lower top at 328.93, and then the bear market decline accelerated in
earnest with the meltdown coming when the 308.56 low was taken out (see chart).
With the jaw-boning I heard the last couple of days, "Mr. Fed" Bernanke
(everything is good with the world) spoke to Congress and said that he is
watching the markets closely with the Open Market Committee (translated means
PPT), in addition to the President saying he is conferring with secretary Henry
Paulson. I would say they will aggressively intervene in any continuation
meltdown, so there is no 1987 repeat. They can just let the currently
inadequate electronic opening process take out the emotional retail selling
early, and then intervene in the futures market to get the averages going to the
upside again. The sharp discount brings in all the bulls buying the first
significant decline since the 5/8/06 SPX 1326.70 high decline.
The early SPX futures are -7 at 8:15 as I
complete this commentary, and the most positive action would be a mini-meltdown
this morning to the next key price zone from 370-365, which includes the 200
dema. From there we should get a nice bump.
Have a nice 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
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