Obama 2012 Election The Next Major Bear Market Cycle
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 1/17/12
It has been 9 trading days since the 1/3/11 commentary when the SPX made a 1284.62 high and closed at 1277.06 The SPX then formed a 5 day inside bar narrow range on very low volume and there was very little travel range for trading.
The index then took out the 10/27/11 1292.66 high on 1/10/12 and made a new high close at 1292.08 It finished last week at 1289.09, or +0.9% for the week. The Avg NYSE volume for the initial 9 trading days of 2012 was only 788mm shs the first week and 784mm shs last week.
The current rally from the 12/20/11 1202.37 low pushed the SPX 5 RSI to 81.67 on Thur, which is the highest since the 7/7/11 1356.58 high, but the price momentum was on below average UVOL, and low overall volume. However, the SPX is now above all MA`s, and the 1292.66 10/27/11 high, so the S/T trend is up but extended, and could be pushed to the down trend line zone from the 1370.58 5/2/11 high which is just below 1325. It got a head start this morning making a 1303 high on the 9:45AM bar versus the previoius 1289.09 close.
The Financials, Materials, and Industrials continued their 2012 hour-glass reversal [Sector SPDRs] after leading the downside in 2011 at -18.5%, -12.78%, and -3.21%. They are the leaders so far this year with Materials +7.85%, Financials +6.38%, and the Industrials +5.27%, while the SPX is +2.48%. The leaders last year were the Utilities at +14.81%, Consumer Staples +10.85%, and Health Care +10.13%.
In 2012 Utilities lead the downside at -3.06% and Consumer Staples -1.08%. The CNBC empty suits keep hyping the move into Technology, but that is only selected Techs so far as the Sector is +2.48%, which is the same as the SPX [+2.48%], and the Health Care sector is also under performing the SPX at +2.1%. The Energy sector is barely positive for 2012 at +0.48%. The hour glass year end reversals are standard procedure for many money managers as they rebalance equity sector exposure in their portfolios.
The market has been trading as if the “herd” expects a QE 3, but the USD has been making new rally highs, and is above all of its MA`s, so a continuation of that rally will put pressure on equities, not to mention the inevitable default problems in the Euro Zone that will shake the U.S. market.
The empty suits at CNBC keep pushing the Administration`s talking points about the UE rate, jobs etc, but the reality is quite different, even according to the biased Fed. The problem in Housing is the Unemployment Rate as there are not enough qualified buyers, and many think the risk of more unwinding will put more downward pressure on housing prices, not to mention the decline in disposable income, higher food and energy prices, as well as the continued increase in local taxes etc.
Obama keeps pushing short-term gimmicks that make headlines appealling to the base, but do nothing for long term planning for investors while confusing future investment costs with self defeating regulation like Dodd-Frank and Obama Care, both of which turns over much more of the rule making to the whims of socialist bureaucrats.
All that is going to do is help set up the next -50% deline in the SPX before the current Secular Bear Market, which began in 2000, comes to an end in 2016-2017 This is an election year so the artificial hype and promises will be rosy but shallow. However, after, and if they push the market to new highs above 1370.58, and Obama gets elected for another term, it will set up the mother of all shorts, and you will not be happy investors if you don`t protect yourself.
The daily travel range as obviously been reduced by the signifcant drop in volatility, so in addition to day trading the major indexes etc concentrate on the higher volatility individual stocks in the major averages, in addition to those mid-cap stocks that are very liquid.
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