Anticipated Bear Market Cycle Low 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 $SPX took out the 1257 3/17/08 cycle low last Thursday and hit a 1252.80 intraday low on the 10:00AM bar. Members of the Trading Service were anticipating the RST reversal opportunity if that low got taken out. The RST actually set up when 1260.68 was taken out, but the key was when the 1257 cycle low got taken out. The RST entry above 1256.98 ran to 1271.48 before fading to the 1262.90 close (see chart). The symmetry was excellent as the RST entry reversed the actual 3/17/08 1257 cycle, low which was the magnet in play.
Once the 1268 .382RT to 769 from 1576 got taken out, that increased the odds that the $SPX would trade to the next zone, which is the 1172 .50RT The $SPX hit 1240.72 yesterday, and is extremely O/S, as it is beyond the -2.0 STDV level on a 6-month STDV Channel chart. The key Square of 9 angles in play on the downside are 1239, 1223, 1204, 1187, 1170, and the strongest symmetry, which is the 1172 .50RT zone, with the .618RT level at 1077. The average $SPX decline in the post World War 2 bear markets is -27.6%, and 359 calendar days (The chartstore.com) The $SPX would be -25.6% at 1172, and -31.6% at 1077, so the odds strongly favor a bear market bottom in that range. The odds favor a sharp O/S rally before any reversal down to that 1172 zone.
The energy and materials stocks have been correcting and that has put added pressure on the $SPX because the financials just keep making lower lows. However, despite the XLE -7.0% the last 3 days, and -8.2% for the OIH, there have been a few excellent long intraday reversal opportunities. For example, the XLE made a 82.05 intraday low yesterday, and my one day -2.0 volatility band was 81.49, so trading service members had a reversal opportunity, with a valid signal bar entry above 82.24, that ran to 83.97 on the 3:40PM bar, before closing at 83.22
The reaction to financial, credit, and oil news is accelerating price moves more than ever, especially now that the $SPX has taken out that 1257 low Yesterday, was certainly a prime example with the Fannie Mae
(
FNM |
Quote |
Chart |
News |
PowerRating) and Freddie Mac
(
FRE |
Quote |
Chart |
News |
PowerRating) news about raising significant capital, in addition to the ongoing Lehman Brothers
(
LEH |
Quote |
Chart |
News |
PowerRating) (-8.8%) saga, and also Merrill Lynch
(
MER |
Quote |
Chart |
News |
PowerRating) that might have to sell two of their best assets to raise more capital. The consumer is getting hit from all directions with the declining housing market, rising gas prices, and also the parabolic rise in food prices because of the US Government’s Ethanol boondoggle, that has achieved nothing but pain for the consumer.
When you understand how to anticipate and identify high probability trading opportunities, and have the discipline to trade only these kind of strategies, you will avoid the emotional kind of response trading that prevents most traders from succeeding.
The next commentary is Thursday 7/10/08
Have a good trading day!
Receive Kevin’s top stocks and ETF set-ups every morning! Click here for your free one-week trial.
