The Daytrader’s Gold mine
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 hit a 1007.12 intraday high Tuesday on the expected advance this week to the 1010-1015 key price zone. This week has 4 different time symmetry dates, and so far the SPX has been churning in a relatively narrow range, with highs of 1003.61, 1007.12, and 1006.64 yesterday, while the lows have been 990.22, 996.68, and 994.31.
On Monday the SPX was +1.5%, accelerated by the $US dollar decline which sent energy, materials, and gold higher. The BKX is on a roll and has advanced 11 straight sessions, so when you get the intermarket trade going as the $US dollar declines, in addition to strength in the financials, it usually results in a +1.0% day or more.
The opening SPX trade for day traders yesterday was an opening range (Flip Top) B/O to new intraday lows below 1003.14, which traded down to a double bottom at 994.31 on both the 10:20 AM and 10:45 AM bars. If you used the futures for the trade the entry was below 1000.50 which made a 991.25 low before reversing, or if you used the SPY the entry was below 100.47, and that traded down to 99.58. For most it would be easier to just trade the SH or SDS for a short SPX trade. The key is to trade the derivative off the cash index, and use either the index proxy or futures.
The initial short in the SPX, and also the GDX which had the same setup, was put in motion because the USD was advancing, crude oil declining, so you expected the SPX and GDX to head south also because the intermarket inverse relationship has been highly correlated for quite some time.
However, the SPX reversed and went trend up after the first hour, as did energy, materials, and gold, because the USD reversed to the downside, and this also sent the TLT south and it finished -1.5% to 90.94, while the SPX rallied to a 1002.72 close, or only -0.3%. This inverse relationship continues to be a goldmine for daytraders and hedge funds alike, so we will stay on the train until the correlation changes.
The market remains extended in a vertical move, with obvious negative momentum divergences in the SPX, and especially the QQQQ, so a reversal from the key price and time zone still remains the highest probability.
Have a good trading day!
Click here to find full details on Kevin’s courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.