The China Factor–What It Means To The Market
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is intended
for more advanced traders. If you would like to learn how Kevin trades,
you can find more information here.
From a trading standpoint, the energy stocks like
(
OIH |
Quote |
Chart |
News |
PowerRating) and
(
RIG |
Quote |
Chart |
News |
PowerRating) with First Consolidation Triangle Breakouts to New
Intraday Highs, in addition to a stock like
(
WFT |
Quote |
Chart |
News |
PowerRating) with an Opening Reversal
that also reversed the previous day’s high, made it a good trading day. There
were, of course, good intraday setups on many of the other focus list energy
stocks. The first day of August was simply a drag for the major indices from a
trading standpoint. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) traded in a narrow 5.3 point range
from 1239.10 – 1233.80, closing at 1235.35, +1.2 points, while the
(
SPY |
Quote |
Chart |
News |
PowerRating) was
red by -0.07%. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) finished at 10,623, -0.2%, while the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) was +0.2% and Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) +0.5%. There is nothing very
cohesive about that kind of market action.
NYSE volume was on the light side at 1.32 billion
shares with the volume ratio 59 and breadth +297. The index proxy volume was
well below average again and, in fact, the SPY has traded below 50 million
shares four of the last five days. In the sectors, the
(
SMH |
Quote |
Chart |
News |
PowerRating), -0.3%, RTH and
CYC closed red, while the green sectors included the XBD, +0.6%, PPH, +0.4% and
BKX, +0.2%. Both the OIH, +1.2%, and XLE, +1.1%, led the positive sectors. The
(
TLT |
Quote |
Chart |
News |
PowerRating) gapped open below Friday’s 92.85 low and opened at 92.50 and then an
intraday high of just 92.60 before closing at 92.42, -0.4%. This took the XLU
(utility SPDR) to a -1.3% close at 31.85. The other side of that was crude oil,
+1.7% to 61.57, and the $US Dollar, -0.6% to 88.86. It seems that the China
revaluation can have a negative affect on US bond yields. China shifted to a
token trade-weighted basket of currencies, which means they will diversify their
large US Dollar holdings into some other currencies. They are the big holder of
US Treasury bonds, so the diversification and selling of our bonds can send
long-term yields up and the US Dollar down. This can be harmful to the housing
market, as was discussed in last week’s commentary, which in turn is not very
positive for the equity markets if it picks up some steam, and especially if
crude oil remains above $60 and trends higher.
Have a good trading day,
Kevin Haggerty
P.S. I will be referring to charts from
www.thechartstore.com in the future.