Equity Allocation Reduced in Key Zone
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
The market continues to trade divorced from reality, like the Fed will never let it sell off again until the consumers and pension funds recoup more of their equity lost in the “Panic of 2008”, which will obviously be a positive. But it is just a finger in the dyke as the prohibitive tax, borrow and spend policies of Obama’s Administration hasten our own sovereign debt default down the line unless it is stopped.
The SPX has advanced 8 out of 9 days in April, and is +3.52% MTD. This comes on top of March which was one of the most consistently positive months in history as the SPX finished +8.1% on the month, and +7.2% for Q1. The SPX hasn’t had a -1.0% pullback since 2/23/10, and the last time that happened was over 3 years ago.
It appears that the Fed’s conspiracy theory is more realty than myth. Just last week there was an article about an ex Golden Sachs trader that blew the whistle on gold and silver manipulation by the Fed and its financial minions. It outlined how major banks such as ^JPM^ does the Fed’s bidding in the metals markets to keep the price of gold and silver down versus the U.S. Dollar.
The trader explained how JPM is stopped out by the Fed for any losses during the intervention tactics, as was HSBC, the other bank mentioned in the article. It is a fact that the Fed intervened in the 1987 stock market crash (PPT), because it is documented by R. Heller, a former Federal Reserve Governor, in addition to Greenspan himself who said the Fed reserves the right to take protective measures regarding the stock market, which means that it is also a Fed tool.
It is essentially a jobless recovery so far, while many companies continue to increase profits due to significant cost cutting, but not top line revenue growth in majority of cases. Foreclosures are mounting, consumer credit still contracting, as are commercial and industrial loans by banks. The 10 and 30-year interest rates are rising, and the Fed is trying to jawbone them down with the worn out line that “interest rates will remain low for an extended period of time”, but the bond market is not buying that because this is now a period of lack of confidence in Government’s ability to meet its future obligations, let alone break the Ponzi scheme of unfunded entitlements like Medicare, Medicaid, Social Security, and others. There is not a chance in hell that the health care bill just passed will be any different.
Once the SPX took out the 1121 .50RT to 1576 from 667 it was anticipated that it would trade to the 1229 .618RT zone, and with the 1210.65 high yesterday it is now in the zone. The long term SPX position bought in Feb/Mar 2009 will be reduced to 30% in this zone. There is some significant cycle time symmetry this week, and again in mid-May, so the longer term risk factors have increased exponentially.
The SPX will be +84% from 667 to 1229, versus the +105% bull cycle from 769 (10/10/02) to 1576 (10/11/07) which was the first bull cycle in this secular bear market which started in 2000. However, that cycle had favorable financial and economic stimulus, unlike the onerous situation that we have now, and we are still in a secular bear market, so that is why I say there is a disconnect between reality and the current market.
Have a good trading day!
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