This trading strategy helped catch the energy rally

It was a no decision day yesterday, as the SPX (+0.2) traded in a narrow 3.5 point range between 1403.49-1400. $INDU was essentially flat at 12319. NYSE volume was 1.52 billion shares with the volume ratio 63 and breadth +786. There has been no selling pressure following the expiration, and the seasonal bias is up today and Friday. Liquidity will be thin and there will be more random price movement than normal on less volume. The market is closed Thursday and will close early on Friday, so if traders don't get something done this morning, it is better to take off and come back on Monday.

Next week will bring us a month-end mark-up action by the generals and some larger hedge funds. The monthly performance to-date for the SPX is +1.7% and +12.3% year-to-date, so you can bet that they will try not to let much of that slip away through year-end. The SPX angle of advance since July looks like a silver or palladium parabolic spike. It is even sharper than 1987. These kind of angled moves usually end with similar spikes to the downside. The PPT (Plunge Protection Team) did an excellent job accelerating this move. In last Friday's commentary, we anticipated the energy stock reversals, and it was an excellent day for traders. In Monday's (11/20) commentary, we said that the current energy stock retracement from the 11/15 142.22 intraday high will continue to provide opportunity for daytraders, and that was exactly what happened yesterday. There were many of the regular strategy entries (5-minute charts) in stocks like ECA (1st Consolidation Break Out), XTO (Flip-Top), RIG (1st Consolidation Breakout) and NUE (50% Gap Pullback), to name a few. These strategies are all explained in the 1st Hour Trading Module. There is no energy reversal advantage today after 3 straight up-days for the OIH from 133.75 to the 140.19 close yesterday. Any continuations today carry much higher risk.

The SPX has zero edge for traders right here, as this is the 13th day up from the 1360.98 11/3 low, but the month-end mark-up next week will probably off-set the technicals.

Have a good trading day,
Kevin Haggerty