The Coronation Rally
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 took out the 851 trading range low yesterday, and this triggered stop loss and technical chart selling. After making an 836.93 intraday low, the SPX closed at 842.62, versus the 842.43 .50RT to 741 from 944.
NYSE volume expanded to 1.42 bill shs, and the VR (volume ratio) was only 0.3, which is the lowest it has been since 11/19/08 when it hit 1, and the SPX finished -8.9 on the day. There was 1.38 bill shs down yesterday, with only 47mm up, with the VR at 0.3 and breadth -2490. The banks and energy led the downside, but all sectors were red across the board. The BKX lost -12.2 last week and another -10.3 so far this week as the news about their losses and need for significantly more capital grows louder.
The expectations have been, and are, for a very negative Q408 and Q109, but continued easing in the credit markets, new low mortgage rates stabilizing the housing markets, and increased lending by the banks will take the market higher in 2009, while the unemployment number which is a lagging indicator will go higher. The unknown is the extent of how the new Socialist Government plan is comprised, because an infrasture spending plan is not going to get the job done, and it will only accelerate the downside.
The market is extremely ST-O/S, with the 4DMA’s of the VR and breadth now at 21, and -1265. The 5RSI went out at 18.85, which is the lowest since 11/20/08 when it hit 18.60, before it reversed that SPX 741 low the next day and closed at 800.03, which resulted in the +27.3% rally in 29 days to the 944 high (180 Degree angle from 741) and also 938, which is the .236RT to 1576 from 741. The high close for the advance was 934.70 on 1/6/09 and then it reversed from that key price and time zone with a very ST-O/B condition with the 4DMA’s of the VR at 75, breadth +1774, and the 5RSI 81.21.
The hour glass has now turned upside down to a ST-O/S condition at the 842.43 .50RT to 741 from 944 as the SPX went out at 842.62, and this week had time symmetry on 1/13 (+/- 2 days) and the same for today which has 2 minor time symmetry counts. Also, it is a long Holiday weekend with the market closed Monday, followed by the “Coronation” on Tuesday. The odds favor the bounce, but if not, the “Coronation Team” might have to lean on Paulson to put the PPT to work on Tuesday morning, because the new Treasury Secretary has a few tax problems to explain.
Have a good trading day!
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