The Market and Obama Playing Chicken
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 reversed its +2.4% gain yesterday and sold off in the last two hours to finish red at 753.89, versus the intraday high at 774.53. The market was extremely ST-O/B going into yesterday with the 4MA’s of the volume ratio and breadth at 78, and +1653. It was also extended in price as the SPX was +15.8% in 6 days off the 666.79 low to yesterday’s 774.53 high, and that is obviously not sustainable without a pullback, so some trading money was taken off the table, and once again the market declined following an Obama speech.
The previous 3 rallies in the SPX have all been +20% or more so the minimum price objective for this one is the 805 zone which is the .50RT to 944 from 667. The Obama spending and budget con job has taken a new twist the last two weeks from the prolonged “depression like recession” rhetoric to, out of his mouth, “the economy is not as bad as we expected” and Bernanke saying that the recession could end in 2009 (from his mouth to God’s ears). However, nothing has really changed in the economy the last two weeks, so I guess they are visionaries.
The change in tone has helped, but it won’t mean a thing if this derivative meltdown continues to spiral out of control, because the market has yet to hear a specific proposal on how to deal with the toxic assets and solvency problem. Last week, the White House said the plan was coming “within weeks”, but based on the first Geithner “no specifics” speech, we should regard that as a maybe.
Based on the pork spending bills passed, and the proposed budget, it is safe to say that the Government is out of control, and has put the cart before the horse by not attacking the primary problem first. The market will not wait much longer for that to happen, or else the SPX could trade down to the lower end of the key price zone from 665-602
The next commentary will be Thursday (3/19).
Happy St Patrick’s Day!
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