Bernanke News Spike Hits SPX Price Zone
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 Fed announced yesterday that it would buy an additional $750 bill of mortgage-backed securities, an additional $100 bill of agency debt, and $300 bill of longer-term Treasury securities as it looks to stem deflation of the deteriorating debt bubble, stabilize housing prices, and hopefully bank collateral. Unless the Fed can sell short-term bills to offset the purchases, the money supply will expand to extreme levels over the next year, and the $US dollar will head south, which will add to the currency turmoil as countries devalue their currencies to improve their competitive trading position, and protectionism rears its ugly head, especially from what we see developing by our new union loving “Socialist Republic of America”.
The SPX was essentially flat yesterday until Bernanke gave the market a bonus, and the SPX spiked on the 2:15 PM bar, and ran from 778 to an intraday high of 803.04, before closing at 794.35 (+2.1). The INDU closed at 7487 (+1.2), and the QQQQ +1.3. Both the TLT and the GDX also spiked, with the TLT advancing from 101.26 to 108.07, before closing at 104.37, and the GDX running from 30.88 to 35.15, followed by a 35.07 close. As you would expect the $US sold off on the announcement, and the $USD index finished the day at -2.9.
The SPX hit the initial 805 price zone objective yesterday (803 high), which is the .50RT to 944 from 667, and also a previous trading range resistance, so some short term trading money was taken off the table, as the SPX is +20.3 in just 8 trading days from the 667 low, which was an anticipated key price and time zone, in symmetry with an extreme O/S condition. You can’t know the duration or extent of a move, but if you have gotten in at a high probability zone, it is just a question of trailing stops, or in this case taking +20.0 off the table (not replacing with calls) on a good part of the position, and keeping a tail for any upside continuation.
Suffice to say the market is extremely ST-O/B at a key Fib RT level (805), so it will either reverse, or churn around this level and then trade up to the 838 .618RT level (944-667). However, this is not a level to enter a new long position if you have missed the move. You will get a chance to buy this market at lower levels as it challenges the 667 low.
The next commentary is Mon 3/23/09.
Have a good trading day!
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