Haggerty: More Downside After Bounce
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 traded through the 1046.93 50DEMA on the opening bar, and hit 1060.72 on the 11:00 AM bar, with the 20DEMA at 1060.42, before reversing. After the FOMC noise with the 1058.36 high on the 2:15 PM bar, the SPX traded down to 1049.47 on the 2:25 PM bar, followed by more FOMC noise as it traded up to 1061 and the 20DEMA again on the 2:40 PM bar, where it reversed once again. There was a 3:30 PM program sell off into the 1045.15 intraday low before closing essentially unchanged at 1046.50 (+0.1%).
The SPX hit 1029.38 on Monday, which was an 8 day -6.5% declines from the key price and time zone 1101.36 high on 10/21. This put the market in a ST-O/S condition, and a bounce was expected. The .50RT to 1101.36 from 1029.38 is 1065.37, and the .618RT is 1073.86. I don’t expect this bounce to trade through the 1075 level, but I still expect a continued decline into the mid to late November key time symmetry.
The FOMC had nothing new to say, but the line that got me was that they will stick to their promise and keep interest rates low. What choice do they have, because if they don’t we will have a replay of 2008, and then some. The empty suits on CNBC are not talking about it because they are in the tank for the Administration because of their GE boss Jeff Immelt, but there is an extremely dangerous regulatory financial services supervision proposal that might be made into law.
 There are several things wrong with it, but the most significant is that it will grant the Secretary of the Treasury a veto over Section 13 (3) emergency action by the Federal Reserve Board of Governors (Cumberland Advisors). If this becomes law it will essentially put the politicians in control of the central bank, which is about the worst thing that can happen to the financial system.
The $US dollar macro “carry trade†is still the primary market catalyst in both directions. The “herd†is all on the same side of the trade, and any short covering will accelerate a downside move. That will happen when the market believes that the Fed will start raising rates, and the deeply O/S $US Dollar will have a sharper rally than expected and it will put pressure on equities and commodities.
The next commentary will be Thursday (11/12), so I wish those of you that care a Happy Marine Corps Birthday on Nov 10th, and for those of you that don’t, I hear the Administration has a few more Czar positions available.
Have a good trading day.
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