What is Your Sell Strategy?
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 SPX finished last week at +2.2% to a new rally high close at 1026.18 on 4 straight up days from the -3.9% pullback from 1018 to 978.51. The options expiration into last Friday was obviously up, and usually there is a snap back on the following Monday or Tuesday, but yesterday wasn’t it, as the SPX was only -0.05 to 1025.57, after making a new intraday rally high at 1035.82, or +55.3% from the 3/6/09 bear market low of 666.79.
Yesterday was a neutral day for the market on NYSE volume of 1.39 bill shs, with the volume ratio 56 and breadth +77. The 4 day MAs of the VR and breadth coming into yesterday’s trading were very ST/OB at 80, and +1454, but essentially this Friday is month end, because the regulators frown on last day mark ups (8/31), so the Generals could push the SPX higher and the market will remain ST-O/B until a quick reversal after month end.
The inverse $US dollar/commodity relationship continues to drive the market higher as the energy sector has led this rally to new highs. The OIH is up 5 straight days and +10.4%, while the SPX is +4.75% for the same period. Crude Oil (WTIC) went out at 74.37 yesterday, which is a new rally high close, and is +8.1% the last five days. This intermarket relationship with the $US activity continues to be a goldmine for day traders, and has obviously been a primary trading focus in the Trading Service for quite some time, as mentioned many time before in previous commentaries.
The 1965-1982 period was a secular bear market, followed by the secular bull market from 1982-2000, and now we are in a secular bear market. These seculars are usually 16.5-18 years in length, and in secular bear markets timing is the key for longer term investors, while in secular bulls the buy and hold approach is best for most investors. However, that may be the case on the way up, but probably 85% don’t take money off the table, or reduce their equity allocation enough, and they get caught hanging on all the way down. I am sure you have heard friends tell you about the 200-2002 bear market (-50.5%) and the 2007-2009 bear market (-57.7%), which we will dub as the “Panic of 2008”, and is derivative meltdown that is going to cause much more pain before this secular bear market is finished, accelerated by the current and proposed policies of this radical, socialist bent administration.
My view has not changed that this bull cycle will track the 1970 and 1974 bull cycles within that secular bear market, and those two cycles were +70%, and +80% respectively, which would translate to 1134, and 1200, for the SPX from the 667 low. There is also symmetry with these two zones in that 1121 is the .50RT to 1576 from 667, and +68%, while 1229 is the .618RT and +84%.
I will expand more on my anticipated cycle sell strategy in my TM’s call this Thursday at 12:00 PM.
Have a good trading day!
Click here to find full details on Kevin’s courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.