Trading Strategy For The Current Major Index Level

Kevin Haggerty is the former head of trading for
Fidelity Capital Markets. His column is intended for more advanced traders. If
you would like to learn how Kevin trades,

you can find more information here.

erratic price moves in the SPX
(
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PowerRating), but the closing price, 1230.39, +0.6%

on Friday and +0.3% for the week, was not unlike the last five weeks’ closes

which were (rounded) 1228, 1234, 1234, 1226 and 1230, which are just 8 points

(0.6%) between the high and low close. On the week, it was technology finishing

red with the
(
QQQQ |
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(
COMP |
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PowerRating) -1.0% for the week, finishing at 2157. Friday’s -1.8% decline for

the
(
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negative divergence to the SPX, closed at 10,600, -0.8% Friday and -0.6% weekly.

The brokers were accelerated last week by some deal hype, with the XBD
(
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the gold sector with the expected oversold rally that also saw cash gold break

out of that symmetrical triangle above 440, closing Friday at 446.20. The cash

move was preceded by the gold shares, which resulted in our focus gold stock,

(
NEM |
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PowerRating), +9.0% on the week. (Take a report, 1,2,3 Higher Bottom traders.)

In bond action, the
(
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of 93.31, +1.0% Friday and +1.8% for the week. The TLT position shorts were

covered at the lower channel line and the 40-week EMA zone and the oversold

bounce was expected to hit 93 – 94. The .618 retracement to 87.53 from 97 is

91.14 and the TLT bounced off a 91.28 low (see 08/09 commentary). This oversold

bounce occurred in spite of the continuation of the current advance in crude oil

from about 56.50 to the 67.37 +0.9% close on Friday. That is a gain of +19.2% in

just 16 days. The sequence of rising crude oil, gold, bonds and stocks (on

supposed strong economic numbers, if you believe the numbers) will change

quickly. The US Dollar ($US) closed at 86.97 vs. the 200-day EMA of 86.61 and is

and
(
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PowerRating) all having closed above their rising 5-, 15- and 40-week EMAs, so there

is no technical event to warrant any action. The SPY closed at 123.06 with the

low of the high week (124.74) at 122.67 and the 5-week EMA at 122.77, so they

are the immediate downside focus. Last week’s high/low is 124.50 – 122.38. The

SPX has initial daily chart price support at 1220 – 1218 with last week’s low at

04/15/05 low to 38.32 on 08/02/05, has declined -5.5% to Friday’s 36.22 intraday

low, closing at 36.34. This retracement comes from the .618 retracement zone to

45.67 (this bull cycle’s high) which is 38.92. Initial upside focus is the .50

retracement to 45.67 of 36.71 and downside it is the 50-day EMA at 35.91

retracement level worthy of a high-probability short-term long position. Strength

will be sold, and only daytrading positions will be taken until that changes.