It Doesn’t Count Until You Bank It
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.
Early January has a seasonal and historical bullish bias and the SPX is +1.9% the first two days led by the commodity sectors. It made a new cycle high yesterday at 1136.63 before closing at 1136.52, which is a +70.4% advance from the 666.79 3/6/09 bear market low, and is already 67% of the +105% gain for the initial secular bear market rally from 769 (10/10/02) to the 1576 high (10/11/07). Investor sentiment is as bullish now as it was at the 2007 bull market highs, but the market continues to trade well ahead of reality and is badly in need of a pullback.
In my year end commentary for 12/31/09 I highlighted the differences in the economic and monetary climate in 2002, versus the current situation with the Socialist borrow, spend, and tax government now fully in charge of the congress, and the head dictators office. Recessions from financial crises tend to be severe, and are usually followed by a very anemic recovery, so a period of low growth and higher inflation is the most likely scenario this time, which is obviously not positive for any sustained equity market advance.
We are facing massive deficits, but there are artificially low interest rates, so that raises the potential for a government funding crisis later this year, and a spike in rates. My guess is that the Fed’s Ponzi Treasury debt scam will continue, and a spike in rates will be pushed out to 2011.
In that same year end commentary I said that the odds were 65-35 that the SPX will trade up to the 1200-1250 key price zone, which includes the 1229 .618RT to 1576 from 667, and +84% from the 667 low, which is 80% of that 105% cycle move from the 769 2002 low. At that point I will have exited 75% of the index proxy longer term position bought on a scale down in Feb and March 2009, and will keep a tight stop on the remaining 25% in case the SPX over shoots and hits the 1310 .707RT zone.
It only counts after you bank it, as those buy and holders know all to well seeing that the SPX was -23.3% for the past decade ending 12/31/09, that started with the SPX 1469.25 close on 12/31/99.
Happy New Year!
Click here to find full details on Kevin’s courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.