New Key Price/Time Zone In Play

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.

It is redundant to say New Record Lows in the $US Dollar and Record Highs in gold and crude oil, but I will once again. Yesterday China made some noise about reducing dollar holdings, and it resulted in another fear day at the "casino." It was the 8th fear day this year, where the SPX was -2.0% or more. In the previous commentary (Manipulated GDP and Job Numbers), I said that when 1489.56 got taken out, the next key price zone was 1476-1470. The SPX closed at 1520.27 on Tuesday, and hit the price zone yesterday, with an intraday low of 1475.18 on the last bar before closing at 1475.62 -2.9% on the day, with the $INDU -2.6% and QQQQ -2.4%. The financials took the biggest pounding, with the $BKX -5.8% and $XBD -4.5%. Next week is a key time period, so the probability is for a reversal from the current price zone, if it holds into next week. If the SPX blows through the zone, there is some minor symmetry at 1467-1465, followed by the .618 retracement to 1370.60 8/16/07 low at 1449.

NYSE volume expanded to 1.65 billion shares yesterday, with 1.54 billion shares down and just 101 million shares up, for a volume ratio of 6, while breadth was -2694. All sectors were red, as you would expect on a -2.9% SPX fear day. The negative credit, liquidity, and housing news continues to hang over the market, as does the declining $US Dollar, and crude oil pushing $100 with increased Middle East tension. After another wake up call like yesterday, there will be some money taken off the table on any rally into year end. The SPX, $INDU and QQQQ made new cycle highs last month, but were not confirmed by the $TRAN and IWM, which are both trading below their 200-day emas. The major European indexes like the $DAX, $CAC, $EUR and $FTSE failed to take out their July highs, as did the $NIKK and the $TSE. All the major sectors except energy and technology are trading below their 200-day emas, while the banks ($BKX), retail (XRT), and semis (SMH) have already taken out their 8/07 lows, and are well below their 200-day emas. There were also negative momentum and money flow divergences in the SPX, $INDU and QQQQ as they made new cycle highs, so it is a very weak technical market for sure, and the highest probability is for the SPX to make lower lows following any kind of year-end rally.

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Have a good trading day,
Kevin Haggerty