How to Best Identify Market Turns

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.

Commentary for 7/7/11

The SPX was +5.6% last week after the +1.4% advance on Fri [7/1/11], which made it 5 straight up days, after the 4 straight day mark up into the end of the QTR. The market gapped up on the ISM number Fri, which some with no ax to grind said was actually soft, and the SPX finished at 1339.67, up from the previous 1320.64 close. The USD had declined for the same 5 day period. The trivia buffs “who quote them but don`t trade them” said it was the biggest weekly SPX advance in two years.

The SPX has advanced +7.3% from the key price and time zone low outlined in the previous commentary for 6/24/11 [The Market Rings a Bell at Key Price and Time Zones] to the 1351 high as of 10:00AM this morning [7/7/11]. The intraday low for the decline from 1370.58 was 1258.07 [6/16/11], but the low close for the entire range was 1265.42 on 6/15/11. The SPX B/O above the 1298.61 range high and 50DEMA on 6/29/11, and is trading today above the 1344.07 2/18/11 high, and the 6/1/11 1355.20 high.

The market was significantly S/T-O/S in the key price and time zone, with the 4DMA`s of the VR and BR at 26 and 32, with the 5RSI at 17.10 After yesterday they were S/T-O/B at 66 and 69, with the 5 RSI today at 86.07.

It was a key price zone at the long term MA`s following the SPX -8.2% decline, and the 6/13/11 time period was also a significant long term Pi date, but most of the pundits and empty suits on CNBC had their helmets on and mouths zipped. All they could say was if, if, and if, regarding getting long the market at the time.

They are all back on board now after the fact, and ignoring anything that would upset their prognosis for a strong second half of 2011, while the bullish earnings season spin noise is higher than ever. My view is that the best money is made at the market turns, provided you can pinpoint them with a high probability, and a positive mathematical expectation of success. I accomplish that by utilizing the combination of Fibonacci, Square Root relationships, Geometric Angles, and Pi, confirmed by several momentum indicators.

My timing approach is obviously contrary to most market players, as they try to play the trend in the middle, which I think has as much credibility as the pure Buy and Hold approach. My view is that trend entries are actually good tactical second entries to your initial key price and time zone postion, because they confirm your first entry, and the market turn.

You can never know the exact duration and extent of a move, but the odds favor the SPX taking out the 1370.58 magnet high after a pullback, following the TRAN index which just took out its 5/2/11 cycle high the last couple of days.

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