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..
Commentary for 12/17/10
The SPX finished last week at +1.3% to 1240.40, and closed yesterday at 1242.87 as the market has been churning at the 1245-1250 price zone with the last four intraday highs at 1246.73, 1246.59, 1244.25, and 1243.75 yesterday. Bond yields have risen as the new “herd perception is that the bond bubble has burst. The Inflation/Deflation perception has flipped flopped about 4 times over the last two months.
Bernanke gave another pessimistic outlook for the economy at the last FOMC meeting in that growth was disappointingly slow, and not fast enough to add jobs in significant numbers. He also said the recovery is to slow to dent unemployment although the economy is growing, and that he would stick with the $600 bill QE2 and more if needed. He expects a low growth recovery over the next five years.
However, the tax extension bill was passed today, as expected, despite all of the B—S— surrounding it, in addition to the deduction in the payroll tax and other extended benefits outlined in the previous commentary [12/10] that will increase the deficit further. The market has already discounted the expectation of the tax bill being passed and the futures are quiet this morning prior to the NYSE opening.
Most analysts are increasing their economic and stock market forecasts for 2011 based on the current proposal, although most analysts and institutional investors still expect a low growth environment for 2011.
The market is churning at the upper end of that 1228-1250 key price zone and has multiple negative momentum divergences. This is month 21 and there has been total Fib time symmetry since the 4/26/10 1219.80 high, so that is a red alert going into 2011. There is also some longer term Pi time symmetry in early Jan from the 10/11/07 1576 high, which is a major red alert. The Generals have a good year going for them YTD so I expect they will try to mark their major holdings up into year end.
The POMO of the Fed has been active almost every day since the end of Nov, and consequently the SPX is up 10 of the last 12 days, and it has not closed below its 8DEMA. The Fed will continue to be active in early 2011, but I don`t think that will prevent the market from correcting in the early part of the year.
Have a Merry Christmas and a happy and safe New Year!
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