More Government Spending and Regulation Equals More Bear Market
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.
2/24/09
Obama gave another speech yesterday, and the result was another mini-meltdown as the SPX was -3.5 to 743.33, but still failed to break the 741 bear market low (yet). The INDU has been playing catch up, and finally took out its 10/10/02 bear market low of 7197, before a close at 7114 (-3.4). The TRAN is down 10 straight days at -20.8 to 2587, and was the first to take out its 11/21/08 low. The SPX implied volatility based on yesterdays 743.33 close is 46.79, and that is significantly lower than the 74.17 when it closed at 752.44 on 11/20/08, ending the “panic of 2008”
The NYSE volume yesterday was 1.61 bill shs, with a Volume Ratio of 20, and breadth -2278. The 4MDMA’s of the VR and breadth are extremely ST-O/S at 26 and -1632, as is the 5RSI at 9.94. There is also key time symmetry on both 2/20 and 2/21 (+/- 2 days), so it is a high probability reversal zone, especially if the SPX 741 magnet low gets taken out this week, which will probably be today.
The Geithner (wherever he is), and Obama speech fiasco of the last two weeks have been a significant advantage for day traders because of the volatility reactions, and there have been multiple RSTs in the major indexes and energy ETFs, in addition to some excellent contra trades in the GDX because of the fear reactions. Tonight is another speech by Obama, so why would any traders go out long today.
The Congress had to close its cafeteria and outsource it because it was supposedly losing $18 million, and now they are in charge of our major banks and brokerage firms, so how confident are you about that? (0). I would imagine there will be some mini runs on deposits from C and BAC when they are formally nationalized in the next week or so, and that will generate more volatility for traders.
Unless the energy stocks reverse from this O/S condition, there is not much chance of a sustained reversal, because it “ain’t” going to come from the financial stocks. It will continue to be a traders market for quite some time, and based on what this Government has proposed so far, or in the case of Geithner, not proposed, the SPX can easily take out 700 to the downside, either before, or after a technical bounce.
Have a good trading day!
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