Odds Still Favor a March Reversal
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.
The SPX had another mini meltdown yesterday and finished at 682.55 (-4.9) while the INDU was -4.1 to 6594. The GM bankruptcy saga continues, only proving that the non political analysts were correct in that there should have been an immediate Chapter 11 reorganization to solve the union stranglehold on the company etc. Instead GM got $13 bill and now want $30 billion more to put in the bottomless pit. The union dependent administration will no doubt give GM the money.
It was evident that the market was in trouble yesterday right from the beginning when the major indexes gapped open to the downside, and both the TLT, and GDX, gapped to the upside and never pulled back. The SPX went trend down all day, with only a small +9 point contra move. All sectors finished negative and the only thing green was the TLT +2.8, in addition to Gold, and the $USD.
The bumbling white house accelerated yesterdays decline when it added fuel to the fire by making a statement that they expected a very negative jobs report, as if the market expected anything else. It takes to much common sense to make it after the close, but we haven’t seen much of that so far based on two bad pork filled spending bills that will not produce the expected jobs, followed by the huge budget proposal filled with earmarks by both Democrats and Republicans, not to mention the $700 bill “Socialized Medicine” proposal, which is just the beginning, and the administration forgets to mention in that frequent “47 million Americans are without healthcare” speech, that more than half are illegal immigrants, just ask CA and NY, who are both going under without a Government bailout because of it.
As I mentioned in the previous commentary (on March 4th), there is strong long term price symmetry from SPX 665-605, and there is significant time symmetry through 3/20/09, so the odds favor a strong technical reversal from March lows. The SPX is -22.1% (high to low) in 17 days since the Geithner speech on 2/10/09, with only 4 up days in that stretch.
The most important problems facing the Treasury are how to keep the major financial institutions from insolvency, address the toxic assets, free up the capital markets, and alleviate the housing crisis. Geithner offered no specifics about any plan in his 2/10 speech, and the market has responded with a -22.1% decline, which is 39.0% of the entire -57.0% bear market decline from the 10/11/07 1576 SPX bull market top. Instead of a coherent plan to remedy the most important problems, we have gotten huge social spending bills, tax hike proposals, including the global warming carbon tax scam, any many other things that don’t solve the potential insolvency crisis. There will be no sustained market advance unless it senses a positive plan by this bumbling administration to address those problems.
Have a good trading day!
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