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TradingMarkets.com
If You Missed Yesterday's Moonshot, Here's What Happened -- And What To Look For In The Future
Wednesday July 2, 9:36 am ET
By Kevin Haggerty


What Tuesday's Market Action Tells You
Yesterday's market action was a trading moonshot for those of you that are using the strategies from the seminar and/or modules. Markets are perverse and yesterday was no exception. There was an early overreaction to inane news and then a reversal off of a key inflection level that resulted in a major intraday trading opportunity that was good for almost 20 trend up points in the futures. The bias going into the July 4 weekend was up, as institutions generally invest some new monies if they are getting some in, so you were not surprised at any rally attempt, but the magnitude of yesterday's reversal sent daytraders home very happy.

NYSE volume was only 1.3 billion, the volume ratio 63, and breadth +640. The major indices all finished green, with the SPX (CBOE^SPXNews) +0.8%, Dow (CBOT^DJINews) +0.6%, Nasdaq (NasdaqSC^IXICNews) +1.1% and QQQs (AMEXQQQNews) +1.3%, but that didn't tell the trading story. At 11:00 a.m. ET, the SPX was -10 points and closed at the end of the day +8 points. The QQQs were -1.7%, then closed at 30.34, +1.3%, while the Semiconductor HOLDRs (AMEXSMHNews) were -1.8% at 11:00 a.m. and closed at 28.91, +2.4%, but were actually +2.6% just before the close, which was, in fact, a +4.4% trading reversal.

For Active Traders

The gap down opening started the day off with a clearly defined Flip Top pattern with the required filter. Entry on the short side was below 97.15 on the 10:00 a.m. bar. Things usually happen around that 10:00 - 10:15 a.m. time slot. The SPDRs (AMEXSPYNews) traded down to the 96.43 intraday low on just one five-minute bar at 10:05 a.m. That was a 962.10 intraday low for the SPX. There is a confluence of numbers from 960 - 963 and that was our first anticipated awareness level after breaking the head-and-shoulder pattern. (See the June 30 commentary.)

Yesterday's volatility bands for the SPX were 1.0, 965.62; 1.28, 963.14; 1.50, 961.19; and 2.0, 956.75. Between the volatility bands and that 960 zone of confluence, you were alert for any trade setups in this zone. You were not disappointed, and there was an RST long entry above 964.30, which also became a 1,2,3 higher bottom entry above 964.26 for those of you who are not familiar with RSTs. Once price also re-crossed the 1.0 volatility band at 965.62, you had to be on that train because it was an entry at the lowest common denominator with excellent risk/reward. From entry, the SPX ran up to an intraday high of 983.26, closing at 982.47. Whether you traded the SPYs or futures, it was a nice moonshot.

The QQQ gave you the same reversal patterns as the SPY, while the SMHs presented you with a 1,2,3 lower bottom with entry on a reversal of the 27.72 low, and then a 1,2,3 higher bottom entry above 27.79. The intraday low was 27.65, right at its 1.0 volatility band for yesterday. The SMH ran up to a 28.97 intraday high.

Needless to say, when an index or HOLDR gives you a reversal pattern setup, that means some of the stocks that comprise the HOLDR/index are obviously also setting up. For example, KLA-Tencor (NasdaqNMKLACNews) traded down to a 45.02 intraday low on the 10:55 a.m. bar, which was right at the 1.5 volatility band at 44.98. From that low, a 1,2,3 higher bottom set up with entry above 45.20, which ran to a 47.03 high, closing at 46.93.

If you trade big cap stocks -- and you should -- and you don't have the volatility bands for the SPX 500 and NDX 100 in front of you every day, then that's all the better for us that do. The Flip Top strategy with filter is explained in the First-Hour Strategies module, along with Opening Reversals, Trap Doors, and Gap Pullbacks. The 1,2,3 tops and bottoms have their own module, and the RSTs are only taught with the seminar materials, which includes everything in the new seminar, video and 553-page manual.

Today's Plan Of Attack

Both the QQQ and SMH closed above their 20-day moving averages of 29.96 and 28.71, respectively, so they become initial downside pivots today and also a potential upside re-cross if they shake the tree early.

The SPX closed at 982.47, above its 20-day EMA, which is now 980.75, and just below the "523" longer-term moving average, now at 982.88

Pre-holiday trading gets thin as professionals get a leg up on the weekend, and that makes it easy for the hedge funds to push price, especially if the Generals are trying to put some new money to work in individual stocks, rather than just buying futures and/or index proxies and sector HOLDRs to gain equity exposure while buying stocks at a future date when prices are in line.

I prefer the index proxies, futures and HOLDRs during this thin erratic trading before a holiday, but after yesterday, there are some stocks that have set up again, so you should be aware of them in case the "game is on," as they say. The stocks are: SMH, KLAC, NVLS, QLGC and CY, as they all set up around their 20-day EMAs. Also look at AVID, MERQ, SNPS, and then BA and UTX.

Have a good trading day.

Kevin Haggerty