The Early Warning Signs for 2008
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 rallied +4.3% from 1435.65 on 12/18 to 1498.85 on Wednesday 12/26. In
the last commentary (12/20), I said the bias remained up into year end, but not
with the same enthusiasm after the SPX failed to hold the 200-233 day ema zone
(1474-1466).
Monday was an early close, and NYSE volume was only 537 million shares, with
the SPX +0.8%, while the volume on Wednesday was also holiday light, at 838
million shares, and the SPX +.08%. The major indexes were up 4 straight days
into Wednesday, and the market had swung back to the short-term overbought zone,
with the 4 ma of the volume ratio 67 and breadth +892. But that is discounted,
because year-end is Monday, 12/31, and we defer to the Generals’ markup bias.
That bias didn’t hold up yesterday, as the SPX was -1.4% on light NYSE volume
again of 983 million shares, and the volume ratio just 11 and breadth -1735. It
was trend-down all day for the major indexes, and the Pakistan hit may have been
a bit of a catalyst, but that stuff has been, and will be an ongoing factor in
the markets for a long time. The financials led the downside, with the $BKX
-2.3% and $XBD -2.1%.
I also said in the last commentary that the highest probability is for new
market lows in 2008 as the bear cycle continues to unfold. We will start 2008
with an expanding housing bust, rising oil prices, tighter credit, and sinking
consumer confidence, all of which will most likely lead to a sharp decline in
corporate profits in the first half of 2008. The analysts are already cutting
2007 earnings estimates, and will be lowering 2008 Q1 estimates as well. The
volatility will increase next year, as the global economy slows and earnings
disappoint, in addition to the expanding credit tightness in both the U.S. and
global markets.
With volatility comes opportunity for traders, and as the current market
trends change, there will be new leadership, which I will expand on in the next
few commentaries. Take some time in the next few days to review 2007, and plan
any changes or additions that you expect will improve your trading in 2008. I
suggest you start with risk management, and go from there.
I’d like to wish everyone a Happy New Year,
Kevin Haggerty
Check out Kevin’s strategies and more in
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1st Hour Reversals Module,
Sequence Trading Module,
Trading With The Generals 2004 and the
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Have a good trading day,
Kevin Haggerty