Intraday Trend Versus Reversal Trading

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The major indexes closed higher for the 3rd day, with the SPX bouncing off a 1476.70 low on Tuesday, to close yesterday at 1502.39 +0.4%. The $INDU was +0.2% to 13241, and the QQQQ was +0.4% to 46.59. May 2nd was the 1st day of the current time period. NYSE volume was the lowest of the week so far at 1.58 billion shares, while the volume ratio was positive at 65, versus 82 the previous day, and breadth +496, versus +1644 on Wednesday. There was a lack of selling pressure, as a smaller amount of big cap stocks carried the SPX higher. The 1533 3/24/00 SPX top is just a few buy programs and/or PPT accelerations away, so the assumption has to be that it gets taken out before this spike rally from 1364 (1370-1365 key price and time zone) terminates. The energy sector continues to advance, and is also a daytrader's gold mine, with the high intraday volatility and strong daily trend. The OIH made a new 161.58 high yesterday (161.20 close) versus the 1/11/07 125.81 low, and is +28.4% year to date. The OIH cycle high is 169.75, and it looks like "they" will certainly make a run at that.

Traders had a quiet day in the major indexes yesterday, as the SPX traded sideways from the 10:55 AM 1502.91 high into the 1502.39 close. There was an initial Gap Pull Back setup for bullish traders on the 9:45 AM 1496.94 low bar, if you anticipated a breakout of the previous day's high, which was also a new high. There were RST strategy trades in focus list stocks like MER and NUE, in addition to FCX, and also the range breakout in the OIH, which also meant other opportunities in component stocks. The inefficiencies of the electronic market opening process, and subsequent algorithm adjustments by the generals to these extended opening period moves, has only 1 primary beneficiary, and this is the daytrader's, the very group "they" would like to eliminate. Intraday reversal strategies have increased ten-fold due to the inefficient pricing. The one that is hurt the most is the retail investor, which is the very one the regulators claim they want to help. Same old, same old. Intraday trend trading carries far more risk in the current market environment, and this will only increase, as algorithms and program trading continue to drive the intraday price swings.

Just like last April, the jobs number will probably be inflated, and interpreted as positive, so this will probably set up Volatility Band shorts in the major indexes today. As I complete this at 8:15 AM, the S&P futures are +6, so the game is on.

Have a good trading day,
Kevin Haggerty

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.