Chart is fact, media is fiction
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 stocks, the SPYs, QQQQs (and
more) for the next day’s trading?
Click here for a free one-week trial to Kevin Haggerty’s Professional
Trading Service or call 888-484-8220 ext. 1.Â
The market action was
weak relative to month-end and the Generals were nowhere to be found
on the buy side yesterday after the first hour. The SPX closed at 1239.20,
-0.9%, and went trend-down from 10 am into the close. The intraday high of
1253.37 pushed the 1254 -1263 resistance zone for the eighth time in the last
nine days. The $INDU was -1.1% to 10,925, and just like the SPX, has still
failed to trade through their .382 retracement levels to the May bull cycle
highs. NYSE volume was 1.55 billion shares, volume ratio 21 and breadth -1410.
All primary sectors closed in the minus side. Technology continued to head
South, with the QQQQ and SMH each -1.9%, while the $COMP was -1.1% and has the
worst daily chart of all the major daily indices after making a bull cycle
double top at the 2375 level. The QQQQ (NDX 100) topped out on 1/11/06 at 43.31,
while the $COMP topped out in April. Both indices have significantly declining
200-233-day EMAs and both are also below their 377-day EMAs, which is where the
SPX and $INDU reversed on 6/14/06. Both the $COMPX and QQQQ are what I call “BTL”
indices (below the line), where price < 20 < 50 < 200 (see charts). The housing
stocks
(
HGX |
Quote |
Chart |
News |
PowerRating), Retail
(
RTH |
Quote |
Chart |
News |
PowerRating) and Semis
(
SMH |
Quote |
Chart |
News |
PowerRating) are all BTL indices along
with the TLT (long bond proxy). What is wrong with this picture? Nothing, if you
continue to listen to the empty suits on TV and the other shills they drag on
their shows every day, which are there for one purpose: “good forecasts sell
stocks, bad ones don’t.” Any significant oversold rally in these BTL indices is
another selling opportunity, as it will be for the SPX and $INDU on retests of
their May highs.
The media’s standard format calls for them to
start hyping a summer rally now, especially if the Fed indicates any backing off
and acknowledges that the consumer is severely wounded and/or they start to
panic that they can’t engineer a soft landing. With midterm elections coming in
November, I doubt they’ll acknowledge the obvious negatives in the economy right
now. They certainly won’t tell you to keep your powder dry because you will be
able to buy the SPX at 1050 or below some time in the last quarter of 2006
through March 2007.
July and August are not the best months for traders, so be prepared to trade
less and only select the clearly defined opportunities. Friday is month-end,
followed by the early NYSE 1:00 PM closing on Monday preceding the July 4
holiday. The Generals, helped by some short covering, will probably still close
the SPX above the 2005 closing price of 1248.29.
Have a good trading day,
Kevin Haggerty
