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 9/2/10
The SPX broke below 1056 last week which is the .618RT to 1010.91 from the last high at 1129.24, and if that happened as I said in the previous commentary [8/24], that the highest probability was for the SPX 1010.91 [7/1] low to get taken out after the next upside short term O/S bounce, and that is what we are in right now.
In the Trading Service, members were alerted to expect the S/T-O/S bounce starting in the 8/27-8/30 time symmetry. The SPX broke 1056 and closed at 1047.23 on 8/26, and then made a 1039.70 low on 8/27 and closed at 1064.59 on a +1.7% day, so the short term rally was on schedule. Day traders that use my RST strategy were very happy as they caught the rally off the 1039.70 low, as you can see on the 5-min chart that I have included.
However, it was not that simple as the SPX followed up the 1064.59 closing with a 1048.92 close on Monday, and a 1049.32 close on Tuesday. There were intraday lows of 1048.79 and 1040.88, so the only positive was that the 1039.70 low held.
After the 1064.59 close last week for the SPX I said that the SPX would close higher this week, but after Monday and Tuesday, it wasn’t looking like that would happen. The SPX was -4.7% for the month of August, and the double dip/deflation scenario was now the “herds” mentality, and the recent economic numbers support that scenario, as does the fiscal and economic incompetence of the current Administration. Everyone has a helmet on and remains under their bed, so it is no wonder the economy has deteriorated like it has the last few months. They have no answers in Washington, and there seems to be no end to their “solutions” that are compounding the problem.
Now we fast forward to yesterday and the US markets “mystery move” that was accelerated in Europe on “nonsense news”, plus a couple of Asian reports, neither of which amounts to anything. The market in Europe was trading on the highs with the worn out “better than expected” PMI report, although it was the lowest in 7 months [go figure].
This sent the SPX futures higher in Globex trading, the XEU up, and the USD weakness led to strength in the metals and energy sectors, and that held all day. Gold sold off and the TLT finished, the day at -2.4%, which is similar to the -2.8% day it had on 8/27 when the SPX was +1.7%. I think it was pretty obvious that bonds were significantly overvalued to stocks because the spread between the SPX/TLT had broken below 10 points, so I am sure there was plenty of rebalancing by pensions etc with the sell bonds/buy stock programs.
The SPX finished the day at +2.5% to 1080.29, so my higher weeks projection looks better, but the two trading days left in the week is a lifetime in this market, but we do have the long weekend, so the liquidity will be thin, and the SPX can easily be manipulated, especially if the jobs report is fixed by the Administration to the “better than expected” B—S— scenario, because August is the month that the BLS pads the Birth/Death adjustment to the high side quite a bit.
The bottom line is that the SPX broke out of a 6 day 2.4% range above 1165.21-11039.70 yesterday, and you can see on the 5-min chart that the SPX accelerated [or was manipulated] a quick +10 points on one bar when it B/O above 1065.21. However, the SPX did nothing for the rest of the day as it traded sideways in a narrow range all day and closed at 1080.29, or +2.5% on the day. Strange market is an understatement, and the world didn’t get better overnight, nor does real perception change that quickly especially on “nonsense news”.
I still think that the highest probability is for the SPX to take out the 1010.91 low sometime in the Sept/Oct period, and the 950-943 zone is the primary target. The SPX is still very negative on a technical basis, as it is what I call Below-the-Line, which is when the 200EMA>50EMA>20EMA>8EMA which you can see on the daily chart that I included.
Have a good trading day!
Click here to find full details on Kevin’s courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.
Click here to sign up for a free, online presentation by Larry Connors, CEO and founder of TradingMarkets, as he introduces The Machine, the first and only financial software that allows traders and investors to design and build quantified portfolios.