Near-Term Weakness Means Year-End Strength
Kevin Haggerty is a full-time
professional trader who was head of trading for Fidelity Capital Markets for
seven years. Would you like Kevin to alert you of opportunities in stocks, the
SPYs, QQQQs (and more) for the next day’s trading?
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The SPX closed Monday at 1409.12, and hit an intraday high
yesterday of 1415.25 on the 10:15 AM bar (5-minute chart), and that was the end
of the market action for the day. The index traded sideways into the
1414.76 close. The up-volume/down-volume ratio ran about +1.6 to +1.9 all
day, and breadth from +650 to +900. NYSE volume was 1.54 billion shares,
with the volume ratio 65 and breadth +863. Sector action was nondescript,
with only the $TRAN +1% and the $XBD +0.5%, outperforming the SPX, which was
+0.4%. The SPX and IWM made new cycle highs on Monday, with the $INDU,
QQQQ and $COMPX still just below their previous cycle highs. $INDU closed
at 12331.50, and will take out its current cycle high of 12361 this week.
$INDU took out its January 2000 bull cycle 11750.28 high in October 2006, and as
of today, only 11 of the 30 $INDU stocks have taken out their previous
bull-market highs of 2000.
There is no edge for traders right here, as yesterday was the
5th day off the 11/28/06 1377.83 low, and there is a negative momentum (5-RSI)
divergence. The internals remain short-term overbought as the 4 MA’s of
the volume ratio and breadth were 64 and +1101 on Monday, declining yesterday to
60 and +819. The 5-RSI closed at 73.83 versus 92.26 at the SPX 1389.45
high and 86.04 at the previous 1407.89 high on 11/22/06 (see chart). The
Federal Reserve and the Working Group on Markets (PPT) will do their best to
keep the markets from any significant decline while the US dollar remains under
pressure. Also, the generals have every incentive to mark-up what is a
very good 2006 with the SPX +13.3% year-to-date. Any short-term weakness
into mid-December will reverse to the upside. However, for you and I, the
numbers only count when you book it or lock in a certain percentage of your
gains.
Have a good trading day,
Kevin Haggerty
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strategies and more in the
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