Market Remains in Key Price and Time Zone

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 was +1.3% yesterday to a new high close of 1150.23, which reversed the -1.1% decline on Friday. NYSE volume was 1.04 billion shares, with the volume ratio 85, and the breadth ratio 78, which reversed the 18 and 31 ratios on Friday. The USD was +0.3% so there was no inverse correlation with the SPX and commodity sectors and that has been the case recently.

The average implied volatility of the at-the-money SPX Call and Put is at a new low for this rally. It is 15 based on the 1150.23 close yesterday, so day traders have to adjust position size for the decrease in volatility. You keep your maximum trade risk the same, but you adjust your stop levels and position size.

There is a lot of daily noise in the market during the hyped up earnings season, and this often means gap up/down openings, which means many initial trade opportunities in the first hour are from extended volatility band levels, so traders can play for the initial contra move, especially in the 10:00AM and 10:20AM time periods.

The current SPX price zones in play are 1142-1146 and 1154-1163, and there is a key time period also in play for the next 5 days, so the reversal probability remains high. A pullback to the 50DEMA will be viewed as a buy opportunity by the “herd”, and I still think the SPX will hit the 1200-1250 price zone, with the .618RT to 1576 from 667 at 1229.

Have a good trading day

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