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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 made a .42RT (1104.73) to the 1150.45 cycle high from the extended STDV low of 1071.59 on Monday and Tuesday of this week, but that was derailed yesterday with the -3.1% “fear day” decline. The catalyst was the worry about Sovereign debt default as the foreign markets sold off and the SPX futures were -11.50 points at one point before the US 9:30AM opening. Perception switched quickly from recovery to a deflation mentality.

The state of CA has a GSP (same as GDP) larger than Greece, Spain, and Portugal combined, and it is essentially bankrupt, so the probability is that they all will get bailed out sooner or later.

The USD rallied strongly yesterday finishing +0.7 to 79.92, which was almost a 7-month high versus the Euro. This sent the commodity sectors south led by the XME -6.9, HUI -5.9, OIH -4.8, and XLE -4.1. Crude oil (WTIC) was -5.0% to 73.10, and there was a move to Treasuries as the TLT gained +1.6%.

The SPX made a new correction low (1150.45-869.32) yesterday at 1062.78, with the key price zone at 1046-1040, which includes the 1043 .382RT to 869.32, and all of the longer term EMA’s. The .50RT is 1010, with the .618 at 977. A -10% correction high to low from 1150.45 is 1035.40. The 200DEMA is 1043.9,7 and the 200DSMA is 1020. The market rarely does what the “herd” expects, so the market will probably reverse from just above the 1046-1040 zone or below it, so if you are playing the zone from the long side do it on a scale-in basis like I will be doing, factor in the 1010.50RT zone.

Have a good trading day!

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