The better way for traders to play this market
Kevin Haggerty is a full-time professional trader who was
head of trading for Fidelity Capital Markets for seven years. Would you like
Kevin to alert you of opportunities in stocks, the SPYs, QQQQs (and
more) for the next day’s trading?
Click here for a free one-week trial to Kevin Haggerty’s Professional
Trading Service or call 888-484-8220 ext. 1.Â
The SPX has
traded in a range between 1324.87 – 1318.16 since last Friday, and yesterday
traders caught a small downside move to 1312.20, but the SPX closed back into the
range at 1318.31, -0.2% on the day. The $INDU was -0.1% to 11,542 and the QQQQ,
-0.7% to 39.85. NYSE volume was 1.5 billion shares, with the volume ratio 36 and
breadth -485, which was helped in part by the TLT, which was +1.0% on the day.
The semis contributed to the QQQQ decline, as the SMH was -1.9%. Gold led the
downside, with the XAU -4.2% and after two up-days, the energy stocks pulled back,
with the OIH -1.7% and XLE, -1.6%. The OIH had bounced +5.7% off its recent low
of 123.30 to 130.37 on the 10:15 a.m. bar yesterday. The gold continuous
contract ($GOLD) closed at 573.55 and will test major support at 540 – 550.
The current
rally has been very selective and on lower volume, but the shorts are getting
more frustrated as the actual index prices have held up regardless of the
economic and Middle
East news. The market trades as if a midterm election fix is in, and this could
force the shorts off the sidelines to push price again. It doesn’t change the fact
that there is no real speculative or investment reason to play this market right
now. The better way to play it for traders is a very short-term hit-and-run
contrarian approach. Portfolio managers and buy-and-hold investors who use no
real market timing must be very frustrated as T-bills have outperformed the
SPX/$INDU for the past 7-8 years. Fifty percent of this bull-cycle gain (72%)
came in the first 12 months following the 769 low. There is little chance the
SPX will offer better than T-bill rates in this current market environment as
short-term gains quickly reverse.
The
contrarian short-term trading approach caught the energy oversold condition and
now the lows are being tested, but it continues to be a primary focus until that
condition is alleviated. Gold stocks are in the same situation. Newmont Mining
(
NEM |
Quote |
Chart |
News |
PowerRating) closed at
43.38, with the 2006 lower channel line and 987 DEMA at 42.25 – 42. The current
bull cycle high was 62.60 on 1/31/06, so that is a -31% decline. 42.25 -Â 40.25 is an active zone where Generals will probably put some buy money to work.
Healthcare and many defensive type stocks continue to find institutional
support and provide short-term traders opportunity, so they remain a continuing
focus. The SMH has provided
daytraders with short-side gains the past three days into the key price and time
zone starting at 35.
Today is the
Fed meeting and regardless of what they do there will be some futures-induced
swings and a good spot for some of the mutual funds to force some short
covering. However, that will not alter the weak underbelly of this market in
both price and time.
Have a good
trading day,
Kevin
Haggerty