What’s Next After Month End
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. Mr. Haggerty is a co-founder of Tradingmarkets.com and is the founder of www.KevinHaggerty.com.
The market internals were ST-O/S starting the week, and the $SPX went trend up Tuesday in the afternoon to finish at 1385.35 (+0.7), while the $INDU was +0.6, QQQQ +1.8, and $COMPX +1.5. In the previous commentary (5/27) I said that the $SPX is expected to close higher this week, and that the “Generals” will mark up some of their key holdings in the leading sectors if they can, absent any overt “derivative meltdown” news.
There was a triple bottom Friday in the $SPX at 1374.11, 1373.72, and 1374.26, and the high of the range was 1381.04 On Tuesday the initial range B/O was to 1384 on the 10:00AM bar, but that failed, and it reversed down to 1373.07 taking out the triple bottom, which set up the RST strategy with entry above 1374.30, and it went trend up into the 1385.35 close. The new 1373.07 low setting up the RST was a nice bonus, seeing that the market was short term O/S, and the bias up into month end.
The $SPX declined yesterday to 1378.16 on the 12:10PM bar versus the 1379.47 .618RT to the previous 1373.07 low, and then went trend up to a 1391.19 intraday high, and 1390.84 close. The index was unchanged on the 3:25PM bar, and then we got the “mystery move” mark up starting on the 3:30PM bar. The more the “Generals” change, the more they really just stay the same. If you had the same month end up bias starting the week from a short term oversold condition that I did, you have had a good week so far. The energy and materials sectors have been the leaders this year so we expected the generals to mark them up if they could, and you saw that today as the OIH led at +2.8, XLB +2.5, and the XLE +2.1 The energy sector has traded down in the first hour both days and this has set up some very profitable RST reversal opportunities.
Next week has some key time symmetry in the last three days, so any anticipated move will be determined by the $SPX price action the next four days, because it is not a key price zone at these levels. The energy, materials, and transportation stocks are still very extended on a 1 year STDV basis so that when they reverse after the month end mark up it will put pressure on the $SPX and I can see no way that the financials are about to become leaders.
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The next commentary is Tues 6/3/08
Have a good trading day!