SPX Rises on Weak Momentum and Narrow Leadership
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There was no real selling pressure on Thursday
and Friday, and the major indexes advanced on lower volume. The SPX was
+0.4% to 1452.85 on Friday, as NYSE volume declined to 1.4 billion shares from
1.49 on Thursday. The internals were also less, with the volume ratio 65,
and breadth +678, down from the previous +1069. Energy and health care
provided the leadership, as well as precious metals. The $INDU was +0.5%
on Friday, to 12612, and that is what it gained on the week.
The coming week is an option expiration, and
there is often a strong plus day prior to expiration Friday. There is also
a longer-term Fib count this week from the 3/24/07 SPX 1553 bull cycle top.
Financials and techs account for a 39% weighting of the SPX (SPDRs), while
energy is 9% and health care 13%. Semiconductors continue to flounder in a
trading range (SMH) since 8/26/06, while the $BKX -0.5%, RTH -0.9% and $XBD
+0.3% were the underperformers last week, despite the SPX moving higher to close
the week at 1452.85. That kind of narrowing leadership and rising SPX has
weak legs, and if the 1461.57 magnet high is taken out, it will set up a
potential RST short opportunity against negative weekly momentum.
The first hour contra move continues to be
daytrader-friendly, as you saw with the SPX on Thursday and Friday, and also the
SMH RST long play on Friday. The primary focus, the energy sector, has
advanced 31% off the 118.19 key price zone (10/2/06) and is now approaching
another price zone at 158-160, so any reversal from that zone should not
surprise traders. The S&P futures were +5 points at 8:25 AM as Greenspan
continues to flip-flop us on his original recession call, and now tells us that
global growth will cushion the U.S. economy, and he wasn’t particularly worried
about subprime (Bloomberg).
The bullish spin machine continues to crank it
up, and is obviously pointing towards the 2008 election. However, with the
current bull cycle now 7.06 years old from the last 3/24/00 SPX top, which is
the longest time between market top in over 50 years, time is not on the
spinners’ side, but the unknown factor is the manipulating market role the PPT
is playing as they refuse to release minutes from the meetings to Congress, that
has requested then. Pretty soon we probably start calling our market the
Banana Republic stock market thanks to the PPT.
Have a good trading day,
Kevin Haggerty
