Trade The Overreactions To News, Not The Same Side As Announced News

The Generals were able to lift the SPX

(
$SPX.X |
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PowerRating) over 13 points from Monday’s 1188.30 low to yesterday’s 1201.56

close, +0.9% on the day. They have done a good job so far, taking it up since

the 1136.15 04/20/05 low. The
(
$INDU |
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PowerRating) was +1.1% to 10,406 and the

“Who cares?” into the six-month report card ending June, was +1.2% to 2070. NYSE

volume was 1.37 billion shares with the volume ratio positive at 78 and 4 MA

neutral at 50. Breadth was also very strong at +1452. Price action was up, but

strongest in the oversold sector SPDRs like the XLI, +1.7%, and XLB, +1.6%. The

sure in those sectors there was obviously profit-taking and short-covering. The

small cap market action was stronger than the SPX, with the
(
IWO |
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PowerRating) at +2.2%

-1.4% and finished +1.3% on a trader’s reversal of the 50-day EMA at 33.63 which

ran up to an intraday high of 34.15 closing at 34.07. Major brokerage firms also

advanced, and the XBD, +1.9%, was more than just that small firm deal news.

Energy was a red sector with the
(
OIH |
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PowerRating) -2.1% and XLE -1.9%. It closed at

101.90 with the first support zone from 100.30 – 99.90.

The month ends Thursday, then it’s the long

holiday weekend, so you are simply guessing at any market action. You have what

has become the Fed Funds rate farce on Thursday and several economic reports

like GDP and weekly unemployment claims this week. Combine this with the erratic

liquidity of a pre-holiday long weekend, in addition to month-end action, and it

means that daytraders should just trade on the overreactions on any of these

reports, not get cerebral and initiate in the direction of announced news. Keep

your powder dry unless there is a defined setup.

Have a good trading day,

Kevin Haggerty

P.S. I will be
referring to some charts here:
www.thechartstore.com in the future.