The Market and Geithner’s Empty Suit No Plan
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 expected a specific TARP plan from Geithner in his 11:00 AM speech on Wednesday, but he came up empty so the market reacted with a “fear day” as the SPX finished at 827.16 or -4.9. The INDU was -4.6 to 7889. NYSE volume expanded to 1.8 bill shs, with the Volume Ratio (VR) only 3 and breadth -2175. The SPX high on the 11:00 AM bar when the speech started was 863.61 and then it traded down to an 823.46 low before closing at 827.16. It was obvious right from the start of his speech that he was an “empty suit” regarding plan specifics, so the futures went south immediately and didn’t look back. If Geithner had said that the mark-to-market rule was going to be suspended the INDU would have probably been +400 points, rather than -400.
The “Pork Bill” they are passing, which also includes the beginning salvo of socialized medicine in the bill, “ain’t” going to get done what is needed to jump start the economy. That will have to come from a well conceived TARP plan that the market has some confidence in. It’s about credit, lending, and confidence, but not about welfare to every illegal alien that crosses our border, as California and New York have found out as they are close to Chapter 11 unless “Big Brother” bails them out.
NYSE volume was 1.36 bill shs yesterday, with the VR neutral at 54 and breadth +647. The GDX was the leader as it finished at +6.9 relative to the SPX +0.8 to 833.74. It spiked on an Opening Reversal strategy above 34.50, just as it did on the 9/17/08 fear day due to the news on LEH, MER, AIG, and the flight from the $U.S. Dollar. It was an obvious fear reaction to Geithner’s “nothing done” speech.
However, the SPX still remains locked in that 878-804 range, and until those levels get decisively taken out, there is no definitive short term direction, nor is the market ST-O/B or O/S. The SPX futures are -12 as I complete this at 9:10 AM, so day traders start the day at the lower end of that range, and unless there is some reality check in Washington, the market remains extremely vulnerable to another “air pocket” down for a test of that 741 low.
Have a good trading day!
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