Negative October Bias on Top of New $US Dollar Lows
Kevin Haggerty is a
full-time professional trader who was head of trading for Fidelity Capital
Markets for seven years. Would you like Kevin to alert you of opportunities in
stocks, the SPYs, QQQQs (and more) for the next day’s trading?
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The SPX finished the 3rd quarter at 1526.75, which is a +11.4% advance from
the 1370.60 9/16 low, following a -11.9% decline from the 7/16/07 1555.90 high.
You just have to say, Good Job Generals and hedge funds, and probably the most
credit should go to the PPT (Plunge Protection Team) in the face of negative
subprime, credit, housing and economic news, not to mention the declining $US
Dollar. The most significant market action last week was the $US Dollar making
new long-term lows, and taking out the 1992 78.19 low, as it closed at 77.47 on
Friday. This is obviously not a positive for the equity and bond markets. As a
result of the declining $US Dollar, the parabolic rise in gold continues, as it
closed the month of September at 743, versus the 1980 all-time 850 monthly high
close. Crude oil went out at 83.35, or +65% from its 1/07 50.48 close. This of
course has pushed heating oil to a new all-time high, just as we enter the
fall/winter season. The actual inflation factor for the real-world necessities
of life for the consumer, like food, energy, health insurance, education,
property taxes, clothing, etc, is obviously much higher than the bogus CPI
numbers put out by the government. These significantly-increased cost of life
necessities, accompanied by the declining home equity values, which is obviously
not a good mix, and on top of that, there is the Democratic congress that is
looking to pass one of, if not, the biggest tax increases in history.
The energy, commodity, technology and multinational stocks have led the
rally, while in the major indexes, the QQQQ took out the July high (50.66) last
week, closing at 51.41. The SPX/$INDU are just above their .786 retracement
levels to July highs, so under normal circumstances you would expect these highs
to get taken out before a significant reversals. The $INDU Utilities and
transportation indexes are not close to confirming a $INDU move to new highs, as
the $TRAN is unable to even break above its 200-day ema. The IWM has also
lagged the other major indexes, and will probably make a negative divergence if
"they" push the SPX/$INDU to new highs before another significant reversal from
what is already an extended Standard Deviation zone.
October is the most dangerous seasonal period, especially after an extended
bull market, and this time there is also the significant catalyst of new long
term lows in the $US Dollar. There will most likely be at least 2 significant
price swings this month, as there are multiple key time dates, so you should
just consider the entire month a key time date. Rising major index prices this
week, with narrow leadership and declining volume will be a good short
opportunity, especially if there is continued selling pressure in the $US
Dollar. Until we see how much the "markets" focus on the new $US Dollar lows
this week, it is better for daytraders to focus on the major indexes and ETFs.
Check out Kevin’s strategies and more in the
1st Hour Reversals Module,
Sequence Trading Module,
Trading With The Generals 2004 and the
1-2-3 Trading Module.
Have a good trading day,
Kevin Haggerty