Investors Choking on Extended Move
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 was bumping along the 838 .618RT level (944-667) yesterday until the 3:00 PM bar when it made a futures accelerated news move up to 852.64 and closed at 852.06 (+1.3). NYSE volume declined to 1.48 bill shs, with the VR 73 and breadth +1330.
The financials led on the day with the BKX +5.0, and XBD +3.0, but it is hard to believe any of the news coming from these firms, or the Government spins on their condition, especially the stress test which is a farce. That goes hand in hand with the FASB temporarily suspending the “mark to market” rules, which will enable the banks to value assets using their own internal standards, and that will let them hide their losses, show earnings, but the toxic assets won’t go away. It looks like a replay of Bernie Maddoff’s accountant. The toxic asset plan won’t work unless the banks start lending, and that isn’t really happening yet in any significant way.
The SPX has advanced +29.6% in 25 days to the 864.31 high on Monday, and the 863 .707RT to 944 from 667. This follows the -29.3% decline from 944 to 667, and based on the previous legs there seems to be some symmetry as the -26.5% decline to 741 preceded the +27.4% advance to 944, and the leg before that was -19.1%, followed by a +19.3% run to 1008. There was also time symmetry on 4/13, in addition to the negative momentum divergences which you can see on the second SPX chart.
The SPX has hit the upper line of the downtrend channel in a rising wedge pattern as money managers and investors won’t let the market come in because most all of them missed the key price and time zone at the 3/6/09 667 low, and are pushing the panic button as if there will never be another down day, and we do know that is not the case. After a Fib correction to a higher low, and then a continuation move to a higher high, it will force most investors into the market for fear of missing a Wave 3 in this rally.
“The problem with Socialism is that you eventually run out of other peoples money” – Margaret Thatcher
Have a good trading day!
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