Traders Long and Short Sector Focus
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.
Today is the last day of the month, and is an important mark to the mark for
many hedge funds and generals that have had a tough August. The President speaks
this morning on the subprime problem, and many expect him to just wave a wand
and make it go away. It will be another one of these “expand the government
role” deals. Bernanke is having a few pops in Jackson Hole, Wyoming at a
conference, and will speak on the current credit problems. The market expects a
rate cut, but hey, didn’t the “funny money” economic numbers that seem to change
each month to fit the crisis say 4.0% GDP? Is that just to tricky Ben could pass
on a rate cut, because the more significant problem is a potential selloff in
the $US Dollar, which will tank both the equity bond markets, not to mention
home values, which were declining long before the subprime or credit conference
prices. We will let the economists figure this one out, seeing that they did so
well in 2000, when 95% of the economists surveyed said there wasn’t a chance in
hell for a recession because “this time is different.” Right. Thanks for the
help, academics.
Today’s show is about to begin with Bernanke, Bush and month-end playing the
lead roles, so why should we be surprised that the SPX futures are +17 points as
of 7:15 AM Eastern time. Maybe the stage crew is the PPT (Plunge Protection
Team), which is overpaid and definitely overworked recently, based on the recent
market fluctuations. They undoubtedly get some help from trigger-happy buy side
traders that keep their finger on the algorithm buttons, and chase price after
every bit of perceived good news. The process obviously works in most
directions, and is also accelerated by the mostly electronic execution process,
that is a dismal failure in fast markets, and has increased volatility
significantly. You don’t hear the empty suits on CNBC criticizing daytraders for
the volatility anymore, but they have their head in the sand about pointing out
the real facts about the unusual market fluctuations. Net-net, if the powers can
be can spin the current situation into a soft landing like 1994, it will be one
hell of an accomplishment. However, I favor the other side of that bet, that the
1370.60 low will get taken out before this cycle is market history, regardless
of whether it is a soft or hard landing.
From a daytrading standpoint, the extreme volatility has been a windfall for
the extended volatility strategies, like RST’s, Trap Doors and 1-2-3’s. The
primary focus on energy stocks, multinationals, index proxies and ETFs has been
extremely succesful on a daily basis. The short-side focus on financials,
brokers, retail sectors, transportation and homebuilders remains intact, but the
best timing is on pullbacks to declining ema’s on the short side, just as it is
on Above the Line stocks to rising ema’s. These are also the best entry
situations in these kind of markets for short-term position traders. As for you
longer-term investors, who are “buy and hold till death do you part,” you were
forewarned long before subprime about the negative risk/reward of the current
bull cycle, so I hope you made some allocation adjustments.
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.
Have a good trading day,
Kevin Haggerty