The Stock Market is a Casino
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 SPX had advanced +19.2% in 6 days to the 1007.51 intraday high on Tuesday (11/4. Then declined to -15.6% in 6 days to the 850 low on Wednesday (11/12) when the SPX closed -5.2% to 852.30. This was accelerated by Paulson’s speech about the 180 degree change in direction for the bailout money, by giving up on the original plan to buy toxic assets etc, and now including other non bank financial institutions, and who knows who else, as the line requesting Government bailout funds has grown exponentially.
However, after making a new bear market low on Thursday to 819, the SPX rallied to +11.3% starting on the 1:00 P.M. ET bar to 913, before closing at 911.29 (+6.9%). The INDU reversed 900 points (+11.3%) on Thursday from 7972 to 8872, and closed at 8835, but it did not take out the 10/10/08 7882 low. The QQQQ, IWM, and MDY also made new bear market lows on Thursday before the afternoon reversal. My previous commentary on 11/11/08 (“The Next Significant Swing in a Secular Bear Market“) sums up my opinion on this market, so I won’t repeat it today, but you should review it, especially if you are adjusting, or planning to change your equity allocation levels.
The afternoon rally just happened to be in concert with the President’s speech, so maybe the PPT helped accelerate the buy programs, which definitely squeezed some shorts as the 10/10/08 839.80 low was reversed to the upside. NYSE volume was 2.0 bill shs, which is the most since the SPX +11.6% gain on 10/16/08. The energy sector led with the XLE +11.8 and OIH +11.0 as crude oil advanced +7.1 (USO), while the HUI was +13.2 as the U.S. Dollar index was -1.0%.
Bernanke is talking in Germany, and his market moving track record following his speeches during this credit crisis, etc, is definitely negative. However, the SPX futures are already at -14 points as I complete this at 8:25 AM ET, which is no surprise after the +11.3% “magic move” yesterday afternoon. The bottom line is that the SPX and INDU remain in their 5 week closing price trading ranges, and the strategy continues to be buying the range weakness and selling the strength until the market indicates otherwise.
Have a good trading day!
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