Traders Benefit From the Daily Knee Jerk Reactions

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.

Commentary for 4/7/11

The SPX declined -7.1% [95 points] from 1344.07 to 1249.05 on 3/16/11 [17 days], with the last two days being the Japan and Libya reaction, and now has gone vertical or + 7.2% [90 points] in 16 days with no retest at all of the 1249.05 low. The IWM, MDY, and INDU have taken out the Feb rally highs, so the expectation is that the SPX follow. The SPX should be renamed the “Bernanke Index” because he will do anything at this point to keep it from selling off significantly on negative news, and there has been and continues to be plenty of that.

Bernanke announced QE 2 at Jackson Hole Wyoming in late August and the SPX bottomed at 1039.70 on 8/27/10, and has since advanced +29.2% to 1344, and looks higher short term. However, at the same time the TLT topped at 106.75 on 8/25/10 and declined to 87.49 on 2/9/11, before an O/S rally to 94.54 on a big 2 day pop [3/15-3/16] on the “crisis” of so called flight to safety. There is no way in hell that Bernanke can control long term rates, with or without quantitative easing. The housing market is still declining, and the UE rate is bogus as we just had the lowest job participation rate in over 25 years, so the 8.8 UE rate number is bogus at best just like the rest of the BLS statistics have become, and that won`t change because Bernanke is a tool of the Administration and the 2012 election is not far off.

Most all of the states are in trouble budget wise, and have unfunded pension liabilities they can`t possibly meet, especially with the public union mess that will continue to grow and get uglier. Bernanke has to avoid another market crash at all costs and that can only happen if the creative ponzi scheme by the US Govt can continue to kick the inevitable sovereign debt default down the road. It makes Bernie Madoff look like a petty thief.

In the real world the trading service continues to capitalize on extended and contracted volatility. The market reactions to any mundane news are immediately magnified, and the basic strategies capture most of these reactionary moves.

I have included some 5 minute charts of current examples. The OIH traded down to the -1.0 VB and 816EMA yesterday to a 163.11 low on the 11:15AM bar and formed a dynamite triangle, but the entry above 163.52 was quickly scratched on the reversal from 163.84. However, the second defined strategy setup was in the -2.0 VB zone, and also formed a dynamite triangle. The entry above 161.64 also reversed the 20DEMA, and the trade was exited below 162.69

The other example from yesterday was SLB, which also formed a dynamite triangle just above the -1.5 VB level and 20DEMA, with the entry above 91.05 reversing the -1.28 VB, and the trade was exited below 91.89 at the 816EMA.

These are two examples from a busy day yesterday, but with the one week free trial to the service you can see these and many more low risk but powerful basic strategies with which to day trade the market

The obvious QE 2 market manipulation since the 8/27/11 SPX 1039.70 low has negated a couple of key market timing dates, and cut short what was probably going to be a more significant reaction, but that has not happened, and the market rally from the SPX 1249.05 low has been on significantly lower volume. Mid-June is a key cycle date, so if there is a continued advance on light volume into that time period the market will be extremely vulnerable for another reversal of a larger magnitude. Bernanke is a tool of the Administration, and will do anything to keep the market on the upswing into an election year, so if there is a correction it will bring in buyers.

TLT Chart

OIH Chart

SLB Chart

Have a good trading day!

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