The Best Daytrading Strategy For This Market

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 SPX made a new low of 1490.40 (-5.4%) on Monday, from the 1576.09 cycle high on 10/11/07. By Friday, the index had regained 52% of that decline to close at 1535.28 (+1.4%) on Friday, and +2.4% on the week. Bad news continues to be good news, and coincidences continue to happen, as each decline the last 3 days had similar afternoon upside reversals. All of this with a $US Dollar that has declined to a record low against the euro, and the $US Dollar Index ($USD) closing at $77.00, in addition to gold rising on the way to 800 and higher, especially if the Fed cuts rates, which well send the $US Dollar even lower. On top of that, we saw crude oil above $92, and other commodities also trading higher. The media spinners point to the Microsoft and Apple earnings, while they ignore the many other big-cap earnings implosions with negative guidance for 2008. MER announced the monster of all write-downs, and CEO Steve O'Neal will be probably pushed out the door, but my guess is that they have another big write-down in the 4th quarter, and there is a lot more of this on the "street" that hasn't been announced yet. Even if the Fed cuts rates again, that still won't create a market for all the bad mortgage securities paper and SIV's. FYI, more write-downs will be forthcoming. When the empty suits of the media are finally talking economic slowdown, that means we are already in a recession of sorts. However, the most important factor for the equity and bond markets right now is whether or not the $US Dollar comes under more significant selling pressure, and foreigners increase their selling of US securities, both stocks and bonds.

Based on how the major indexes are trading relative to the negative economic and financial conditions, the market is either discounting way too much and/or the PPT is doing one hell of a job keeping this market from selling off. I think it is all of the above. The energy and commodity sectors will continue to do well on another rate cut, as will gold, because the $US Dollar will decline. Long term is after lunch for the hedge funds in this fragile market, so short-term un-hedged position traders are at a significant disadvantage to daytraders. With the PPT so active trying to control (manipulate) the equity market, trading the extended volatility strategies has been very active and highly successful. This is especially true when you focus your trading on those stocks/groups/sectors that are outperforming the major indexes, and are the major holdings for the Generals and large hedge funds. The market is a "Casino" now more than ever, and institutions are very aggressive in trading/pushing their major holdings higher. As daytraders, you must have a stock selection process that identifies these stocks, and know the different strategies that will keep you on the train and give you the edge. I suggest you scroll through the different trading modules listed below, and take a 1-week free trial subscription to see what I mean, because you can browse through the archives, and also, there is a description of the stock selection process.

Wednesday is month-end, and then the first couple of days of the new month, so under normal circumstances, the bias would be up. Based on the magic afternoon rallies Wednesday-Friday, I would anticipate this bias to play out.

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.

Have a good trading day,
Kevin Haggerty