Trade the Expanded Volatility Strategies
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.
It was all about commodities yesterday, and in
the equity market it was energy and gold, with the $HUI +4.7%, OIH +2.8% and XLE
+2.6%. The SPX finished at 1428, +0.4%, but other than energy and gold, no
other primary sectors outperformed the SPX, which is not what you call “broad
participation.” NYSE volume expanded to 1.67 billion shares, with the
volume ratio 68 and breadth +1044. The 4 MA’s remain neutral with the
volume ratio 52 and breadth just +187, despite the 1435.20 SPX new cycle high
last Wednesday. The energy stocks have advanced for 7 days, with the OIH
+8.7% (low to high) off its 01/11/07 125.81 low, and the XLE +7.4% for the same
period. Energy stocks will usually lead the commodity, and the crude
future (CL0703) made its 51.20 low last Thursday (Jan 18), and has advanced
+7.7%, closing yesterday at 55.04. FYI, it hit 54.65 on Monday, having
bounced off a very extended standard deviation zone well before the strategic
reserve BS.
A declining $US dollar is inflationary,
especially when it’s threatening to break through support. Yesterday, it
was the $US -0.5% to 84.66, which in turn sends gold higher, in addition to
other commodities, which it did yesterday. Commodity futures that led were
nickel +3.9%, wheat +3.3%, silver +2.6%, gold +2.2%, copper +2.2% and aluminum
+1.6%. The expected reaction in the debt markets under this scenario is
for interest rates to rise, with foreign holders selling off US-related assets,
which was probably the case yesterday with the TLT -0.7%. The
perception/reality of higher inflation and slower growth, which is obvious
despite the attempt to spin the slow growth, is not what the equity market likes
to see. Why do I think I am reading a 1987 newspaper?
For daytraders who understand how to utilize the
different strategies to trade extended volatility (Trap Doors, RST and 1-2-3’s),
the energy sector has been a windfall home, and that will continue for quite
some time. The semiconductors had a seasonal January 2-week advance, with
the SMH +6.9% from 1/3-1/11, but that ended quickly as the SMH closed yesterday
back to 33.12 (range traders take note). The SMH has been range-bound from
35.95-32.65 since 08/25/06. The 01/11/07 high was 35.42 (see chart).
The current bull cycle is the longest time period
between market tops in over 50 years, so time, which is more important than
price in anticipating key market reversals, is obviously not favorable.
The key price zone is available in the trading service, so a trial is a
no-brainer.
Have a good trading
day,
Kevin Haggerty
Check out Kevin’s
strategies and more in the
1st Hour Reversals Module,
Sequence Trading Module,
Trading With The Generals 2004 and the
1-2-3 Trading Module.
