Crowd Psychology Will Prove Wrong Again
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.
It was quite a wake-up call this morning with the futures limit down, which before the opening is +/- 5%, and then after the opening it goes to- 10% which would be 769 on the SPX future. No one has a handle on the extent of the forced liquidations, but it is the catalyst for a possible bear market bottom in the next couple of weeks if the 769 10/10/02 low gets taken out.
The Congressional hearings yesterday were bizarre, especially Greenspan, so I have included part of my Trading Service commentary posted after yesterday’s close which sums up my opinion.
Day traders have a chance to ring the “Gong” today if the SPX opens limit down, and then gets hit again, because there will be a sharp contra move. The SPX has already made an 839.80 intraday low on 10/10/02, which was the anniversary of the 769 10/10/02 bear market bottom and my thoughts on increasing allocation are stated above. I have also included the “Graveyard Chart” for the INDU 30 should the 2002 lows get taken out, so you can see the long term trend line from the 1932 low.
This chart explains why they talk about 5000. Whether it gets there or not is another thing, but if the 2002 lows get blown out it sets up another very rare longer term buying opportunity. There is also some significant Fibonacci cycle symmetry for a 2008 bear market low in that 2008 is 21 years from the 1987 crash low, and 34 years from the 1974 low.
Have a good trading day and keep your helmets on.
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