Market Expectations This Week
Kevin Haggerty is a full-time
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The SPX declined -1.8% on Thursday, accelerated
by the bond market selloff, where the TLT was also -1.8% on over 6 times its
average volume. The TLT finished the week at -2.2%, while the SPX was -1.9%. The
TLT is -6.5% in 5 straight down weeks, and is now the primary focus for the
equity market. This Friday is not only triple-witch option expiration, but it is
also calendar day 1708 from the 10/10/02 769 SPX bear market low, which makes it
the 2nd longest period between 4-year cycle lows since the 6/13/49-9/14/53
cycle. This bull market is already the longest period between bull market tops
over the same period. The longest period between 4-year cycle lows is
8/9/82-10/20/87 (1898 days). The key point is that continued rising rates with a
slowing economy will bring this extended cycle to a close, and let’s hope “they”
don’t sell the U.S. dollar off, which would certainly extend the severity of any
down cycle.
The SPX was -3.2% in 3 straight down days before
Friday’s +1.1% rebound from the 50-day ema zone. It was extremely short-term
oversold into Friday, with the 4 MA of the volume ratio just 24 and breadth
-1515. The bounce was expected if the bond market had quieted down, and it did
on Friday morning after making a new low. With the SPX down to 1487.41 from the
Monday 1540.53 high, it was a good spot for the Generals to get started propping
up their 6-month report card with 15 trading days left in the month and/or the
PPT to get involved by buying SPX futures to calm and manipulate the market
higher. The TLT is extremely short-term oversold, with the next key price levels
at 82.93, 81.50-81.40, 80, 78.67.
The SPX did little or nothing on Friday morning,
as it was trading at 1495.71, versus the previous 1490.72 close on the 1:35 PM
bar when it broke out to new intraday highs and advanced 12 points into the
1507.67 close. That was 70% of the total 16.95 points gained on the day by the
SPX. The TLT rallied from the 83.60 Slim Jim high to 84 after breaking out on
the 2 PM bar. NYSE volume was not heavy on Friday at 1.51 billion shares, but
the volume ratio was 87, and breadth was +1316. In addition to the Generals’
participation, and whatever the PPT did, had to also force some short covering.
The best RST setup in the major index proxies Friday was the QQQQ, as it was led
by the semis with the gap up opening on the SMH, due to the NSM news, which if
you read it, will give you quite a laugh (Yahoo
Finance). Nevertheless, NSM was +14.7% on the day, and this kept the SMH
trend up all day. There were also RST buy opportunities in the OIH and some
component stocks, with entries on the 9:45 AM bar. However, the sideways trading
action lasted until 1:35 PM, and trades initiated on the 9:45 AM bar were mostly
exited by then, so you either played the afternoon breakout or not, but it
preceded the TLT breakout, so it was a “not” from this corner. If the bond
market stabilizes, expect the major indices to be higher this week, and also
expect some volatility due to the option expiration. There is usually one good
percentage move during an expiration week, especially triple witch. However,
make no mistake. If rates continue to rise, the bond market controls the equity
market, and there will be equity sellers into any oversold rallies.
Have a good trading day,
Kevin Haggerty
Check out Kevin’s
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