Trading First Hour Reversals
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.
The Friday after Thanksgiving’s up-bias was reversed this
year, as the SPX and $INDU finished -0.4% on the light half-day of trading.
NYSE volume was only 518 mm, as the Exchange closed at 1 PM. The volume
ratio was 48 and breadth +323, both of which were neutral and better than the
major indexes. The $US had another sharp down day, closing at a new low
(83.68) for the current decline from the 92.39 high close on 11/16/05.
Gold led the upside on Friday, with $HUI +2.5% and +6.7% on the week; gold
usually moves contra to the dollar. The $US topped out at over 120 in 6/01
and again in the 1st quarter of 2002. This 32% decline ended 12/30/04 at
80.59, which is the key long-term support zone. If “they” take that out,
the $US would see a bigger exodus than we have now, as countries like China
diversify their currencies from US dollars to euros, gold, etc, at an even
faster pace.
In spite of the light day, a new NYSE hybrid inadequate
opening process provided daytraders with 1st hour Trap Door reversal
opportunities in the SPY, DIA, IWM, and QQQQ (or their futures). The
openings were on light volume, but because of the weak electronic procedure, the
stocks all traded down to their 480-816 ema zones (5-minute chart), in addition
to their -1.0 VB, where they made quick reversals, almost back to their previous
closes. The major indexes faded in the last 90 minutes of trading, due to
thin liquidity, not heavy selling pressure, as is evidenced by the neutral
internals. I have included the SPY Trap Door chart example, which also
highlights the 5-RSI negative divergence exit warning.
The last few days of the month and first few days of the new
month have a strong upward bias when the overall trend is up. But that was
not the case for month-end October and the first few days of November. The
angle of the current SPX advance off the July lows is similar to the 1987 spike
to highs before the US dollar-related crash, so the major support zone 80-81 is
a very key focus. If that gets taken out, it would be another nail in the
coffin to go along with the slumping housing market, inverted yield curve, and
sharply declining GDP numbers, in spite of the government’s efforts to paint it
otherwise with some funny money subjective estimates, but not facts. Even
the PPT (Plunge Protection Team) would have trouble keeping the major indexes
up, but they certainly have done a great job year-to-date into the mid-term
elections, but to no avail, as you still ended up with Nancy Pelosi.
Have a good trading day,
Kevin Haggerty
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.
