Key Strategies and Year End Wrap Up
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 declined into the key angle 12/14 time date of 1891 calendar days
measured from the 769 low, and was -1.4% on Friday and -3.7% in 3 days from the
most recent 1523.57 high last Tuesday. The market is now short-term oversold,
with the 4 ma’s of the volume ratio and breadth at 29 and -1145. This sets up a
technical upside bias into year end. The SPX over the last 75 years has been up
85% of the time for the last 2 weeks of the year, so that is certainly a
positive for a potential Generals markup. In addition, the SPX is coming off a
short-term oversold condition, and the 200-233 day ema zone (1474-1466), which
held up all last week with lows of 1477, 1468, 1469 and 1468 on Friday. The
recent credit news might have calmed the market a bit, and the $US Dollar index
has rallied the last 15 days from 74.48 to a 77.43 close on Friday, which is
also a positive for a markup of sorts into year end by the Generals and Hedge
Funds.
NYSE volume was 1.3 billion shares on Friday, and the volume ratio only 15
with breadth at -1760. All the sectors finished red, as did the TLT. The SPX
finished -1.4%, while the OIH -2.4%, $HUI -2.3% and $BKX -2.1% led the sector
downside. On the week, the SPX was -2.5%, the $INDU -2.1% and QQQQ -2.5%. In the
sectors, the $BKX led the downside at -6.9%, with the $HUI -6.2% on the dollar
rally, RTH -5.7%, $TRAN -4.1% and $XBD -3.4%. The XLE (energy) was the only
green finish for the week at +0.4%.
Key sectors remain in their own bear markets, which include the financials ($BKX,
$XBD, XLF), retail (RTH, XRT), consumer discretionary (XLY), transportation
($TRAN), semiconductors (SMH), real estate (IYR) and housing (XHB). There are
significant divergences in the major indexes, such as the SPX equal weighted
index (RSP) failing to confirm the SPX new 1276 cycle high on 10/11, and the
$TRAN also failing to confirm the $INDU 10/11 new high. The $BKX topped out on
2/20/07, and IYR on 2/8/07, while both the XBD and RTH topped in 6/07, with the
XLY on 7/6/07, in addition to the SMH on 7/17/07. Housing has been declining
since 2005, and the XHB hit its high when it came out in 2/06. All of these
sectors remain below the line and in bearish sequences relative to their moving
averages. Either these key sectors have to adjust to the current major index
levels, or the SPX has to decline and join the bear market cycle, which is the
higher probability after any year end and early January upside move.
This week is also an option expiration week, so in addition to the short-term
oversold condition, there should be some excellent trading opportunities. The
focus into year end for traders is the top big-cap SPX 2007 percentage leaders
that are also major holdings of the Generals, which certainly includes the
energy sector. Favor the SPX in the indexes because that is where the program
"games" are played, especially into year end, and is also what the PPT (Plunge
Protection Team) will use to halt any mini meltdown by buying the SPX futures
which in turn keys the buy programs.
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