Traders will continue to profit on reversals of extended news overreactions
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1
The SPX, 1214.62, Dow
10,422, and QQQQ, 38.64, all finished +0.4% on the afternoon trend
up. The SPY
(
SPY |
Quote |
Chart |
News |
PowerRating) didn’t take out that 120.39 low of 08/30, but the RST long reversal
did set up for the DIA [
(
DIA |
Quote |
Chart |
News |
PowerRating), having made the 103.44 intraday low on the 12:20 PM bar.
The very next bar gave you entry above 103.50 and the DIA ran to 104.40 (240 EMA)
before closing at 104.04.
Thursday’s commentary gave you the heads up for the RST reversal. The
09/22/05 1.618 time ratio was trader friendly (see
9/21/05 commentary).
The short-term oversold retail, consumer
discretionary and chemical stocks got a bounce, with the
(
RTH |
Quote |
Chart |
News |
PowerRating), +2.2%, XLY, +1.6%,
along with
(
ROH |
Quote |
Chart |
News |
PowerRating) ,+2.3% and
(
DOW |
Quote |
Chart |
News |
PowerRating), +2.3%. The
(
OIH |
Quote |
Chart |
News |
PowerRating), -0.9%, and
(
XAU |
Quote |
Chart |
News |
PowerRating), also -0.9%, led
the red sectors, while the
(
SMH |
Quote |
Chart |
News |
PowerRating), [BKXBKX] and
(
XBD |
Quote |
Chart |
News |
PowerRating) were all in-line with the major
indices.
NYSE volume was 1.86 billion shares and in spite
of the +0.4% close for the major indices, the internals did not confirm with the
volume ratio 49 and breadth -408. The 4 MA of the volume ratio is 32 and 4 MA of
breadth -769.
This will be my last commentary for a few weeks,
but my thoughts on this September/October period are outlined in the previous
2-3 commentaries, in addition to what this corner has done with the long term
index proxy positions. Quick, short-term extended over-reactions continue to
be daytrader friendly and will be throughout this period. Do your own work,
because there is way too much subjective market commentary out there to confuse
you. Refrain from reacting in the same direction as obvious news and let price
and internals confirm your levels in conjunction with the primary tools that
many of you have learned in
previous seminars and the
Sequence Trading module.
Have a good trading day and I’ll see you when I
get back,
Kevin Haggerty
