Weakness to be followed by markup into Q3 end
Kevin Haggerty is a full-time professional trader who was
head of trading for Fidelity Capital Markets for seven years. Would you like
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NYSE volume
expanded to 1.67 billion shares as the SPX declined -0.5% to 1318.05. The QQQQ
was -0.6%, with both the $INDU and $COMPX -0.7%. The volume ratio was 37 and
breadth -556. The breadth number is skewed to the low side because more than 35%
of NYSE listed stocks are interest-rate sensitive, and most of them closed green
as the TLT was +0.9%. The commodity sector stocks were strong, led by energy,
with the OIH +2.0%, XLE, +1.3%, and XAU +1.1%. The semis led the downside, with
the SMH -2.6%, followed by the RTH, -2.3%, $TRAN, -1.5%, and $CYC, -1.4%.Â
Daytraders should have caught the SPX triple top: 1328.53, 1328, 1328.18
(5-minute chart), which was a basic 1,2,3 Close short strategy entry. The OIH,
XLE and many of their component stocks had no carry-through selling from
Wednesday’s big decline where the OIH was -3.6%. They opened up small and formed
contracted volatility patterns, which were Slims Jims and First Consolidation
B/O, for those of you who know the strategies. Other than the OIH and XLE, many
of you traded the individual component stocks such as [NOV|NOV,
(
SLB |
Quote |
Chart |
News |
PowerRating),
(
MRO |
Quote |
Chart |
News |
PowerRating),
(
ECA |
Quote |
Chart |
News |
PowerRating), all of
which had contracted volatility patterns There was also
(
NEM |
Quote |
Chart |
News |
PowerRating) (gold) on a gap
pullback.
The SPX took
out its previous bull cycle high of 1326.70 on an intraday basis but has failed
to close above it. The SPY has yet to take out the 132.80 cycle high, hitting
132.77 on Wednesday
and closing at 131.67 yesterday. If it doesn’t happen today because of some
follow-through weakness for a couple of days, then it will next week into
month/quarter end. There is a key
time period next week: 9/26 – 9/27, so any weakness into that will be followed
by a mark-up into the month/quarter end. The media and many so-called
market strategists keep emphasizing October 2006 as the 4-year cycle low timing. I guess because it is 48 months
from 10/98, they assume this will be the same. The feeling now prevails that if it doesn’t happen in October,
there won’t be one. I strongly suggest you don’t bet
the ranch on that logic. The fact is, that of the past fourteen 4-year cycles, the
average cycle low is 49.25 months. Right now, September is the 47th month. Of
those fourteen 4-year cycle lows, five were between 51.1 – 54.3 months, and that
is the reason I have said many times that the higher probability for a 4-year
cycle low is
October ’06 – March ’07.
Have a good
trading day,
Kevin Haggerty
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