The Geithner Sequel to Toxic Assets
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 from the 805 .50RT zone to 944 from 667 and closed the week at 768.54 (+1.6). It went -3.3 the last two days, but that is coming of a +20.5 rally in just 8 days from the 665 key price and time zone, so any pullback is no surprise. This rally has failed so far at the 50DEMA, just as the three previous rallies did, so the basic Fib RT levels to 667 from 803 are now in play as you can see on the chart and won’t change until 803.24 gets taken out before a pullback to at least 751.
NYSE volume on triple witch Friday was 2.47 bill shs, with the VR 21 and breadth -1533. Gold was the big winner on the week (HUI +13.3) as the $US dollar got hit -4.3 on the Bernanke announcement that the Fed will buy long term Treasuries, buy more mortgage-backed securities, and expand the TALF. It is difficult to relate to the amounts because the Fed just keeps adding zeroes to the numbers. The BKX jumped +17.2 in two days on the Fed news, but gave back -14.1 the last two days. The energy and materials stocks also finished the week with good gains as crude oil advanced and the USO was +10.8 on the week, OIH +8.0, XLE +4.4 and the XLB +4.5.
Geithner’s “no specifics” speech (2/10/09) on the toxic assets and solvency issues, in addition to Obama’s disastrous spending bills and budget proposal, sent the market south as the SPX declined -23.3 to the 667 low which was a key price and time zone. Geithner is now attempting a comeback, and is supposed to announce details of a plan today to expand the current $700 bill Government investment to save the financial system. It will supposedly rely on private investors to buy the toxic assets that are strangling the bank’s balance sheets but the devil is in the details. The expected announcement has the SPX futures +25.75 points as I complete this commentary at 8:00 AM.
For day traders the gap up opening will put the 1st hour Trap Door strategy in play on the short side for the initial contra move if the futures remain extended. The volatility bands for today start with SPX 785.05, and hit the +2.0 VB at 801.57, and then the highly unlikely +3.0 VB at 818.08.
The next commentary is Friday 3/27/09.
Have a good trading day!
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