Traders Profit on USD Volatility
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.
Commentary for 11/30/10
The SPX finished the Thanksgiving week at -0.9 to 1189.40 and was positive only one day as it went -0.2, -1.4, +1.5, and -0.8 on Fri when the market closed at 1:00PM on NYSE volume of only 428mm shs.
The debt crisis in Europe is front and center, and the USD continues to rise against the Euro, and closed yesterday at 80.83 after a new high for this rally at 81.14 as it closed above the 80.50 200DEMA. The USD has advanced +7.6 in 17 days from the 75.73 low on 11/4, which was an USD RST setup that gave traders early warning of the probable reversal because the SPX made a 1227.08 high on 11/5 versus the 1228.76 .618RT to 1576 from 667. The USD continues to wag the tail of the dog [market].
Trading Service members continue to be successful playing the 1st hour volatility caused by the debt crisis turmoil as there are many discount/premium NYSE openings, I have included two SPX 5 minute charts from yesterday`s discount opening as the SPX traded down to an 1173.64 low on the 10:05AM bar, which was between the -1.28 and -1.5 VB`s. The SPX has been in a 8 day daily range coming into yesterday with an 1173 low, so that was a key factor, and the 1173.64 low also set up the RST strategy that is explained in much of my trading material.
Ireland has made a pact with the devil and all it did was help bail out banks in the UK, Germany, US and France. Ireland will eventually default as will most of the PIIGS countries and the only chance for Ireland in this case is to break ffrom the EURO, renew its own currency and then devalue it which helps the people and screws the bondholders as it should be when there are dire consequences of survival.
The IMF austerity program, which was the primary cause of the great depression, is the worst thing that Ireland can do, but they have given up their sovereignty with the EURO, and much more with the deal they just made. As the banks foreclose they depress the real estate, that depresses consumer spending when the people fear their savings are gone, and that depresses revenues for the Govt and forces higher taxes and lower economic growth.
The Fed stated that QE2 is meant to combat the deflation, and their outlook on the economy for 2011-2012 is generally pessimistic. They are buying Treasury Coupon bonds from the banks which run ahead of the Fed, probably with a wink from the Fed, but the banks in turn support and keep the equity market moving higher. The Fed could buy those bonds from the Treasury Dept and not the banks, so my bet is that the Fed`s primary concern is still the potential insolvency crisis for one or more of the major banks, which hold billions in bad mortgage paper with artificial mark to the market prices, and with the approval of the Fed.
The Fed won`t admit it is just printing the money, which is like admitting we are a banana republic. The Fed says it is worried about deflation, but it seems like the only thing deflating is the Feds credibility. The Commodity Ponzi Index [CPI] is benign because each administration keeps deleting from the calculation things that make it go up. However, food, gas, water, electricity, health care costs, tuition, taxes, transit fares, stocks, bonds, and commodities etc, are all higher than they were a year ago. Remember, this is the same Fed that said that the sub-prime crisis was contained right before LEH went under.
The SPX remains in a 1200-1173 range, and any resolution of that range will be accelerated by the USD. Daytraders should only carry over a position if it has a significant profit going into the close. Swing traders are at a significant disadvantage by taking positions on the close during the volatility of the debt crisis. The first hour reversals continue to be the most productive opportunities for daytraders.
Have a good trading day!
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