Trader Focus This Week

March 5, 2007
Kevin Haggerty

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professional trader who was head of trading for Fidelity Capital Markets for
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The SPX finished a -5.5% week on the low close of
the week at 1387.17. The decline from the 5/8/06 1326.70 high was -8.1%,
but it was in 27 trading days. The $INDU finished the week at 12114
(-4.3%). The QQQQ (-6.3%) and $COMPX (-6%) have declined to their 200-233
dema zones. The major indexes are all at extended standard deviation
levels, and the internals are obviously extremely oversold with the 4 MA of the
volume ratio just 28 and breadth -991. The RSI (14) is down to 28.89 while
RSI (5) has averaged less than 20 for 4 days. NYSE volume dropped below
2.0 billion shares for the first time in 4 days Friday to 1.86 billion shares,
with the $INDU volume at 1.62 billion shares. The SPX ranged from
1403.40-1395.78 until the afternoon decline started on the 12:15 PM bar.
It took the SPX down to the 1387.17 close, which was obviously negative price
action coming off the meltdown low of 1380.87 on Thursday.

There will be lots of jaw-boning this week to
calm and reverse the market. If there is continuation weakness, expect the
PPT to step in and play the all too frequent “market manipulation game.” I
still can’t get over the PPT magic leading up to the mid-term elections where
the market accelerated on almost any piece of perceived negative economic or
geopolitical news. It was certainly a plus for traders, as the major
indexes made a sharp upside move, but it certainly didn’t pan out for the
administration. There will be a bounce this week from either the current
1385 key price zone (.786 retracement 1553-769) or if there is continuation
weakness on Monday/Tuesday, it will be from the 1365-1370 zone. There was
enough fear generated last week that there will be many “players” waiting to
lighten up on any significant bounce into the key mid-March time zone. The
sequence of higher swing point lows that were violated on this meltdown now act
as resistant lines on the bounce. They are highlighted on the SPX, $INDU
and QQQQ charts. There was some significant sector declines last week to
their 200-233 dema zones, like the $HUI -9.6%, $XBD -7.7% and XLE -4.4%, so
daytraders should focus on some of the component stocks for a bounce.
March is generally not a positive bias for semis, but the SMH closed at 33.66
and is approaching the bottom of its 7-month trading range, which is
33.10-32.65, and this is where the last 4 bounces started, so that is also a
daytrader’s focus this week, in addition to energy, brokers and gold.