Bank the Trade Off the SPX 667 Low
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 is moving into month end on a high note as the SPX went out yesterday at 832.66 and +2.3, as did the INDU at 7925, while the QQQQ led at +3.1. NYSE volume was 1.81 bill shs with the Volume Ratio at 73 and breadth at +1807.
Geithner announced a toxic asset plan on Monday which caught the market and shorts by surprise as the SPX went vertical and gained +7.1. Prior to that it had advanced +20.5% in 9 days to the 805 .50RT zone to 944 from 667, and was rolling over by losing -3.1% last Thursday and Friday. However, on Wednesday Geithner stumbled again as he flip flopped on the China/Russia noise about replacing the $US dollar as the world reserve currency when he said it sounded good, which sent the $US dollar down immediately, and then the major indexes as the SPX had an “air pocket” from 819 to 791. Someone must have whispered in his ear, because he reversed and said that the $US dollar would remain the world currency for a long time, and then the $US dollar rebounded some, while the SPX had a “V” reversal from 791 to an 814 close. No wonder 4 different people turned down the job to work with Geithner.
For Geithner’s plan to work the banks have to start lending. The private investors want to buy the toxic assets cheap, and the banks think they are undervalued and want to sell them higher so that obviously must change. The Fed is supposed to start buying some Toxic assets today and the market will soon know whether the banks will start lending again.
The SPX is +24.9% (low to high) in 14 days off the 667 low and 665-602 key long term price zone, so it is obviously extended in price relative to time, and it can’t be sustained, so there is no reason for any new buying position at these levels into a bear market rally, because there will soon be another technical opportunity after the market corrects. The 805 .50RT level got taken out, so the next anticipated zone is 838-840, which is the .618RT to 944 and the 10/10/08 low. The SPX made an 833 high yesterday, and month end is next Tuesday, so keep your helmet on after that. The SPX is at +13.3% so far for the month and you expect that the Generals and Hedge funds will try to protect those gains.
The next commentary is Tuesday, 3/31/09.
Have a good trading day!
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