Anticipating Key Reversals
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 $USD index declined -1.4%, and crude oil advanced +7.1% as the energy and materials stocks led the SPX to a +3.8% gain, closing at 909.70, while the INDU finished +3.5% to 8934. The bounce in crude was from just above the $40 level, which will get tested again. NYSE volume expanded to 1.74 bill shs, which is the most in the last six days, while the Volume Ratio was 86 and breadth +1650.
The anticipated sharp reversal of the 769 10/10/02 bear market low from the 11/21/08 low of 741 has advanced +24% in 11 day to the 918.57 intraday high yesterday. The momentum has been strong as the SPX advanced 9 of the last 11 days despite the never ending media “new depression” scenarios which are now being echoed by the Democrats in order to get bailout money, to be followed by an infrastructure boon daggle of pork, which historically has crowded out private investment, and provides only temporary construction jobs.
This bear market decline in the SPX is -53% to that 741 low from the 10/11/09 top of 1576, but over 65% of it has been in the last two months. It was a panic, not a crash, and that led to an exhaustion of selling as market participants got immune to the daily fear. Hedge fund liquidation has slowed, and most of the big tax loss selling is finished, so the market was primed for the reversal.
The SPX went out at 909.70, and took out the previous 896.25 swing point high (11/28), which is a positive continuation, but there is some time symmetry this week, and the market is ST/OB, so the odds favor a downside reversal.
Have a good trading day!
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