Market Remains a Hostage

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.

Commentary for 6/11/12

The SPX has declined -10.9% from the 1422.38 4/2/12 high to the 1266.74 low last Monday, and has advanced and danced around the headline news from Europe and the Fed to finish +3.7% on the week to 1325.65, which is the best weekly gain in 2012.

Bonds, Gold, and the Dollar all finished red on the week, while all the sector SPDRs finished the week green led by the XLF +4.6%, XLB +4.4% and XLK +4.1%. The only other SPDR to outperform the SPX [+3.7%] on the week was the XLY at +3.9%.

This reversal started in an intermediate O/S key time zone, in addition to the 377DEMA price symmetry, with a positive 5 RSI weekly divergence on both the weekly and daily charts. The .382 RT to 1422.38 from 1266.74 is 1326.19, .50RT 1344.56, and .618RT at 1362.93, while the previous rally high is 1334.93.

You can anticipate high probability reversal and acceleration zones when confirmed by other technical O/B or O/S evidence, but you can`t know the duration or extent of a move, so depending on your time horizon and risk parameters, everyone manages their trade/position differently.

The SPX had its highest close of the week at 1325.65 on Friday, but it was on the lowest NYSE volume of the week at 688mm shs, so there was probably some weekend Spain bailout anticipation short covering, and that is what happened as Spain is now supposedly getting a $125 bill bank bailout, and that is up from the initial $35-$50 billion IMF figure. However, the Spanish PM calls it a line of credit not a bailout [right], and then took off on a trip to see Spain play Italy in a “Cup” soccer match. [?]

The initial reaction to Spain in the futures this morning was positive as expected, but it started to fade some before the open, but the SPX still hit 1335.52 on the opening bar versus the previous 1325.66 close, and pulled back to 1322.78 as I complete this commentary, so the pre-market knee jerk reaction didn’t last long.

However, the devil is in the details regarding the Spanish bank bailout and the effects on three other “PIIGS” that have gotten bailouts like Greece, Ireland, and Portugal. Can Italy be far behind? The only thing positive and definite in the Euro fiasco is the increase in volatility, and that is obviously a good thing for us. It usually means we are always playing contra moves from volatility band levels while day trading, because the in line openings and trending price continuation days are the exception in this increased volatility.

The IWM and QQQ have declined to their .50RT zones to the 10/4/11 lows, while the SPX made a 1266.74 low at the 377DEMA with the .382RT to the 10/4/11 1074.77 low at 1289.59, and the .50RT at 1248.57 The indexes reversed in a price and time zone confirmed by a technical O/S condition on both the weekly and daily charts, so after a successful retest of the lows they can move higher.

The market is held hostage by the Euro crisis, and the Greek election is in a few days, so we can obviously expect more headline news volatility, but that has been very productive for day traders. You can also take a free one week trial to my “Trading Service” where you can review the archives of actual trades, in addition to the commentary about the basic strategy.

You can download for free 6 of my calculators that I use to measure price and time symmetry at, and my new 200+ page manual “Markets Trade With Geometric Symmetry” is also available for purchase on the site. It doesn’t matter whether you are a trader, investor, portfolio manager, or analyst, because this manual will enable you to pinpoint high probability reversal zones in any market, including Stocks, Bonds, Commodities, and Currencies.

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