Trading is a Game of Probability
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. He is the creator of a series of training modules geared for professional traders, including “How I Trade Major First Hour Reversals For Rapid Gains,” “How To Successfully Trade The Haggerty 1,2,3 Strategy,” and “How To Successfully Trade The Haggerty Slim Jim Strategy For Explosive Gains.” Mr. Haggerty is a co-founder of Tradingmarkets.com and is the founder of www.KevinHaggerty.com.
The $SPX has rallied +11.6% from the 1257 3/18/08 low to yesterday’s 1403 intraday high in 29 days, which is into our next and most important key price zone since the Bear Market started at 1576 on 10/11/07. This zone is 1396-1417, which includes the long term EMA’s (rounded off) at 1403 (40 week), 1405 (377 day), 1407 (200 day), 1410 (233D), 1414 (12 month).
The 1417 level is the .50RT to 1576 from 1257, and 1403 is the 360-degree angle measured from the 1257 low. This rally is also the first pullback to a declining long term EMA in the bear market, so the odds favor a downside reversal in this high probability zone with symmetry, and that is how it will be played from a short term position standpoint. The zone entry is a low common denominator entry with a high risk/reward.
Trading is a game of probability, and of course you don’t win 100% of the time, but if you are consistent in trading these kind of high probability situations you will win a significantly high percentage of time over the course of the year. This short term position does not prevent the day trader from business as usual in taking the intraday setups as they occur, while you scale into the short term position, and this usually works in your favor if the $SPX trades to the higher end of the zone, plus a few points.
The NYSE volume was light again yesterday at 1.21 billion shares, and that has been the case for most of this rally after the initial reversal days off the 1257 low. It has been more a lack of selling rather than significant buying pressure that has pushed the $SPX, in addition to some very timely buy programs, and also forcing gap up NYSE openings due to the Globex futures pre-9:30AM action, which is just a easy game of manipulation for the large “players”, and also the PPT (plunge protection team).
The $US dollar index is making some rally noise, but nothing good happens unless it can take out the 73.19 range high of the past thirty two days. This might put some short term pressure on commodities, but expect that to be short lived as the buyers will return, especially if crude oil pulls back to the 109-108 support level.
The Gold pull back to 875-870 support is an indication that the dollar might rally, and the NYMEX CL contracted closed at 891.65.
The Generals have been most active in a universe of 50 or so mega-cap blue chip stocks, as they all continue to read the same playbook and move like a “herd”. These stocks are a primary day trading focus in the Trading Service, and will be until the “herd” moves to something else. Energy and commodity related stocks continue to be a major source of day trading opportunities because of the excellent volatility, and the Hedge Funds and Generals are really not much different than day traders in those stocks. You know- “long term is after lunch.”
My commentaries will be on Tuesdays and Thursdays, and I will also do others if there are key market opportunities. Many have sent emails about not being able to locate my commentaries on the Trading Markets site other than on the days they appear. TM’s is aware of the issue and working to correct it.
We have the FOMC rate meeting today, Wednesday is month end, and is also the initial GDP number, which is about 90% estimated by the BEA, and is just a political number now as bad as the jobs report. Two weeks ago President Bush said it is a slowdown, not a recession, so I guess that means the GDP number won’t be a negative surprise. The PPT is probably ready to accelerate any upside surprise 1st time estimated GDP number.
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.
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Have a good trading day!
Kevin