Daytraders SPX Homerun

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.

In the previous commentary (3/18) I said "the technicals remain oversold and the $SPX is back to the -2.0 STDV level on a one year chart, so any short term rally is no surprise." The major indexes had a big gap up opening that day, and the $SPX finished +4.2% as the Fed cut rates .75 basis points, which was below the expected 100 basis points. The shorts were squeezed big time as the $XBD finished +11.6%, and $BKX +7.2%, while the $SPX advanced from the 1257 low (3/17) to the 1330.74 close for a swing of +5.9% Yesterday, the $SPX hit a 1341.51 high on the 9:45AM bar, and then gave back 50% of the advance from 1257, and closed at 1298.42(-2.4%) NYSE volume remained high at 1.97 bill shares, with the Volume Ratio (ADV VOL/ADV VOL + DEC VOL) at 23 and breadth -1218 The energy and commodity sectors have declined the last 14 days with the XME -14.9%, $HUI -13.8%, XLE -10.5%, OIH -10.2% . They led the downside yesterday as well.

The Fed is attempting to inflate the economy out of trouble again, as it has done every downturn since Fed Chairman Volker did the opposite to choke the inflation. The derivative meltdown has sent investors running for cover as the T-Bill rate hit 0.70%, and I have never seen it that low in more than 30+ years. The banks, and especially the over leveraged brokers, are facing a liquidity squeeze, and the Fed`s primary job now is the solvency of financial institutions. Hopefully, the BSC fiasco is the extent of it, but there is never only one, so stand by folks

Daytraders that played the RST, and/or the 123 Lower Top yesterday after the 1341.51 high had taken out the 3/12/08 1333.26 high, hit it out of the park as it traded down to 1298.42 from the 1338.56 strategy entry level, or the 1335.56 123 LT entry on the pullback to 1337.19 The volatility is always a daytrader's best friend (other than the RST), and the last four days the $SPX has gone -2.1%. -0.9%, +4.2%, and -2.4%, so there have been multiple extended volatility opportunities both long and short.

This is a long weekend, with the NYSE closed Good Friday, and the final Triple Witch option expiration activity is today, so be prepared for more volatility. The shorts are more apt to be buyers today in front of the 3 day holiday, fearing that the Fed will pull another derivivative meltdown solution proposal out of their dwindling tool box over the weekend to force a premium opening on Monday with the continued help of the Plunge Protection Team (PPT), squeezed shorts, in addition to the real institutional buyers that are essentially acting as daytraders reacting to every piece of news. You will never have to read the "Crowd Psychology" book after watching the "Herd" react to the current market crisis.

The next commentary is Tues March 25.

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 days! 

Kevin