The casino has big edge this week
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
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The SPX matched its best
week of the year (1/6/06) at +2.9%, bouncing off its 1262.08 low
(200-day EMA) on 8/11/06. It was also a key time zone in addition to option
expiration. The short-term internals are now very overbought, with the 4 MA’s of
the volume ratio and breadth at 71 and +1190, with the SPX 5 RSI at 83.65. This
is obviously a situation where the “Casino” holds a major edge should you be a
buyer. In addition to the internals, last week’s average NYSE volume was the
lowest since March, with the exception of the two holiday weeks. Rising prices
on declining volume is always a red alert. NYSE new highs peaked at 139 on
Wednesday and declined the last two days to 115.89, which is also a minor
negative divergence. There was significant short covering last week in many
technology stocks, especially the semis, with the SMH +8.0% for the week, in
addition to the $TRAN, +6.0%. The $COMP closed at 2164, just below its 200-233
day EMA resistance zone at 1274 – 1277. The QQQQ weekly chart was included in
the previous commentary and outlined the significant resistance at 40 – 43.
Crude oil ($WTIC) hit an intraday 71 low on Friday
before bouncing to close at 72.10. This created some intraday reversal
opportunities for daytraders. The 200-day EMA is 68.31. It looks as if the “bad
guys” won’t let price dip much, as they are making too much money each time they
jack up the rhetoric. As the economy slows and demand falls off, they will
simply create some more fear premium and daytraders will continue to profit from
the daily volatility. With the world situation the way it is–and not about to
get any better–portfolio managers will stay overweighted in energy stocks and
buy them on weakness. Wouldn’t you do the same?
The question now is how will the Fed act in front of the midterm elections, and
my guess is it will be hard pressed to raise rates, which will probably mean a
weaker $US, but positive for precious metals and maybe hold the equity market up
a bit longer. You can’t trade opinions, but you can identify high probability
risk and reversal zones with a high degree of accuracy using the primary tools
that you have learned in the trading modules.
Have a good trading day,
Kevin Haggerty