Generals Short Squeeze, Part 3
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
The market remains in the “Generals” squeeze mode despite the -1.4% day on Wednesday for the SPX, which was accelerated by the +1.4% gain in the $US Dollar Index (USD). The $US dollar has been trading with an inverse relationship to the major indexes, and the commodity sectors. On Wednesday, the OIH was -5.1, XLE -3.9, and USO -3.6. This relationship was reversed yesterday as the $US dollar declined, crude oil and gold advanced, bond yields rose, and the SPX finished +1.1 to 942.46.
NYSE volume has been light the past two days at 1.32, and 1.35 bill shs, as the SPX went -1.4, and +1.1. The key price zone is 923-950, and the 4-day range for the SPX is 949.38-923.26 as price churns in the zone, and is also why it remains in a squeeze mode.
The jobs report this morning will probably be juiced up by the manipulation of the Birth/Death model adjustment, which is pure fantasy by the Bureau of Labor Statistics, and is usually favorably biased in May. I see the futures +5.0 at 7:30 AM so that might be the early catalyst for a squeeze out of the price zone today, at least on an intraday basis, regardless of whether there is an expected rise in the unemployment rate.
The coincidences of a rising SPX in the face of negative Government announcements, Obama and Geithner speeches etc, have increased significantly, so maybe Obama has figured out that the PPT (plunge protection team) is not against his personal “American Ideals”. However, in his appeasing speech to the Middle East yesterday, he had the b—s to say that “9/11 was just a trauma that caused us to act contrary to our ideals”.
Government yields have been increasing significantly the last few weeks, and why shouldn’t they with the debt needs of our Government as the $US dollar is becoming a cocktail party joke. The 30-year mortgage rate jumped to 5.36 this week, and that rate is tied to the 10-year Treasury rate, so this is a significant negative to stopping the housing decline, which still has more to go, and it also makes the toxic assets worth even less than they do already, if that is possible. A declining housing market and rising rates means the banks will have even more capital needs than they do now, so there are more write downs to come, unless another artificial method of accounting is used by the Government to postpone the inevitable. With the Congressional elections coming up in 2010, my guess is that the Government will do whatever it takes to boot the pain down the road.
Because of the extended market condition, this a traders market, and not the time for investors who have missed the entire move to jump in, because there will be opportunities at lower levels.
Have a good trading day!
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