Key time zone this week
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1.
It was certainly a busy first week of
2006. The SPX broke out of its trading range,
closing at 1285.45, +0.9% on Friday and +2.9% for the four day week. The Dow was
+2.2% to 10,959 so it would so it would seem that the 11,000 lock I said for the
year-end markup that failed gets carried over to this week. Even though, “THEY”
said the economy was great during 2005,” The SPX managed just a +3.0% gain while
the Dow was -0.6% on the year. Did some not believe the “THEY” group. I see that
the administration had all the dogs out barking about the great economy last
week and the brokerage firms were expanding on that theme. So why not? They make
the most money when you buy stocks, not when you sell. No different from
many of the old Ponzi schemes so the bottom line is that you must learn to make
key decisions on reality–not hype. They will never tell you when to sell a
stock.
On the trivia side, in the second year of a Presidential Cycle, the market most
often shows gains the first week and gives some or all back the next week. There
are several key time dates this week so we shall see soon enough. Sorry, some
more musing on the economic front. If the economy is so great, how did the GDP
show growth of +4% and corporate profits declined by the same amount and why
does the Fed have their foot to the pedal accelerating the money supply as
commodities continue to go through the roof. The crude oil futures (CLH6) is
+12.1% in eight trading days from the 57.95 intraday 12/27/05 low to Friday’s
4.97 close after a 65.20 high. The OIH was +8.5% for the week with the XAU +9.2%
with rumors of physical delivery being taken in large quantities. At the same
time the U.S dollar was -2.5% on the week to 88.86 and -3.8% from the 92.39
11/16/05 high (see
1/3/05 commentary). The 200-day EMA is 88.81 with the 50% retracement
to the 12/30/04 significant low of 80.54 at 86.49. This zone becomes the first
test for the U.S dollar. A rising U.S. dollar favors the small-midcap
stocks while a lower dollar favors the big cap multinationals. That assumes no
wholesale dumping of dollars for euros. The RUT continued to make new highs last
week in a narrowing rising wedge. The other leading gainer in the first week
with energy and gold is the semiconductors with the SMH +8.1% for the week
on four straight up-days. Looking at the leading percentage gainers in the SPX
last week, it was certainly energy and semis in addition to gold and NEM +7.5%.
The only common denominator on the minus side on the S&P 500 screen was profit
taking in some biotechnology stocks
The most likely key time days this week would be
Thursday-Friday. The price zone with the most symmetry above Friday’s SPX
1285.45 close is 1294 – 1296, then it’s on to the anticipated minimum Wave 5
high zone measured from 769 -1163. That is outlined in the
Inner Circle material. RST players: you see the pattern and know the rules.
Daytraders can take advantage of any SPX strength this week from the short side
as several different time periods are out to the +2.0 extended zone.
Have a good trading day,
Kevin Haggerty