3rd Quarter Mark Up Will Set Up October Reversal
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
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The SPX closed at 1476.65 the day before the Fed rate cut on 9/18, and closed
+2.9% to 1519.78 on 9/18. The rally high was 1538.74 on 9/19, and the SPX made
an intraday low of 1507.13 yesterday, before closing at 1517.21 and below the
9/18 15919.78 rate cut day close. Not much of a move, after all of the "midnight
madness" hype pre-rate cut and after by the empty suits on CNBC. They are now
hyping whether there will or not be a recession, and the reality is probably the
US is already in a recession, and it’s just a question of whether it will be a
soft or hard landing. A recession is not necessary to put in a 4-year SPX cycle
low, as pointed out by Ron Griess at
ChartStore.com. Of the 14 4-year cycle lows since 1949, only 7 took place
during a recession, and 7 took place without a recession.
I said in the last commentary that the Fed has essentially lost the game of
chicken, and this will be known as "the inflationary recession," as the $US
Dollar declines, and gold, energy, commodities and interest rates rise, not to
mention food, healthcare, insurance, education and whatever else we use everyday
that I forgot to mention. However, you wouldn’t know it by the bogus CPI numbers
put out by the government, which is more than willing to carry on the Great CPI
Hoax initiated by the Clinton Administration, when they changed the CPI
measurements to fit their needs. For example, the current official CPI
measurement to 9/30/07 (year to year change, not seasonally adjusted) is about
2.0%, but the pre-Clinton CPI hoax is 5.5%. (shadowstats.com) The Clinton gang just said if the
numbers don’t make us look good, then "change them," which they did, and why the
hell would the next administration change them back? No way. The same people who
got screwed on their cost of living raises, social security payments, etc (based
on the CPI), due to the Clinton 3-card Monte game with the CPI, don’t even know
it, and will put "him" back in office again. Go figure. However, the change was
obviously a benefit to the government debt and social security payments, so "who
cares what happens to the people?"
The $US Dollar hit 78.21, versus the 1992 78.19 low, and closed at 78.32.
This low will get taken out, as I have previously mentioned, and put significant
pressure on the equity and bond markets, and make all of the gold holders very
happy, not to mention the foreign countries that will be scooping up $US Dollar
denominated real estate and corporate assets at a discount, because of the
significant currency discrepancy. For those of you who trade foreign exchange,
the next key $US Dollar levels for potential trading reversals are 76-77 then
72-73. The QQQQ +0.9% and $COMPX +0.6% had obvious positive divergences
yesterday to the SPX -0.3%, and the internals, where the volume ratio was 41 and
breadth -600. NYSE volume was almost unchanged at 1.33 billion shares. The
sectors all finished on the minus side, underperforming the SPX, except for the
$TRAN, which was +0.8% as crude oil declined, and the USO was -1.2%. The TLT
ended the day at -0.4%. However, many of our focus list stocks geared to the
mark up into the end of the quarter this Friday did well, such as, CMI, GD, HON,
MSFT, UTX, HPQ, and NVDA, to name a few. The energy stocks are correcting after
a significant parabolic spike up from August lows, but it is the leading sector
and some of the major holdings might still get marked higher the next 3 days
into the end of the quarter.
The SPX hit the +2.0 3-month Standard Deviation level on 9/19, with the
1538.74 high, and the internals were also short-term overbought, with the 4-MAs
of the volume ratio at 63 and breadth +941, in addition to the 5-RSI at 82. This
is not the kind of market condition that you chase on the long side for position
trades. There has been no real buying pressure since that high last week, so
anything we get these next 3 days is just a blatant mark up by the Generals and
hedge funds into the end of the quarter, which will set up an October downside
reversal. Daytraders have a significant edge right here, and should focus on the
major indexes, ETFs, multinational, energy, commodity and selected technology
stocks.
Check out Kevin’s strategies and more in the
1st Hour Reversals Module,
Sequence Trading Module,
Trading With The Generals 2004 and the
1-2-3 Trading Module.
Have a good trading day,
Kevin Haggerty