Trade the Volatility Not the News
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 3/4/11
The SPX made its rally high of 1344.07 on Fri 2/18/11, and then went -2.1% on Tues 2/22/11, as the Libya Crisis accelerated, in addition to the spike in crude oil, while the SPX closed at 1315.44, but hit a 1294.26 low on Fri 2/25 to finish that week -1.7%.
In addition to the spiking oil prices the last two weeks, we also have the political unrest in Wisconsin, which has spread to 4 other states, and will obviously expand significantly as 45 States are running big unfunded deficits, any many have no shot to make it without federal funding, which is also a ponzi scheme because the US Govt`s growing interest expense make us that much closer to a sovereign debt default.
The headline news is running the market each day, and the Fed is still there with QE2 to prop up the equity market. The SPX declined -1.6% on Tues of this week, and went +1.7% yesterday on initial claims hype, following a low of 1302.58 the previous day. However, as I am working on this commentary at 12:45PM the SPX is 1.2% [16.3 points] to 1314.68, with crude oil and gold trading higher, as well as the TLT.
The political and Middle East instability has resulted in flight to safety capital pushing Gold and the Swiss Franc that continues to make new highs versus the USD, but it is definitely not the USD anymore, which indicates that there is a lack of global confidence in the USD, and that will increase significantly when, and if, Bernanke ends the QE2 program. Bill Gross of Pimco had a great line yesterday when he said that 30% of the US debt during the quantitative easing has been bought by foreign investors, and 70% by the Fed, and then he said “who is going to buy the 70% when the Fed ends the QE program”.
The jobs numbers have become totally statistically insignificant the way they are reported by the BLS. Today they announced a +192,000 increase in non-farm payroll, but the total non-farm birth/death adjustment was +112,000, and that is nothing but an estimated number. The BLS had to revise its 2009 and 2010 estimated jobs numbers down by well over 1 million jobs because those estimates are always over estimated. The unemployment rate was 8.9 today which is a bigger joke,as it has declined primarily because much of the work force has.
In the Trading Service commentary last night I said that a CNBC perceived strong jobs report would then be Super Bowl hype, but then it would be exposed to further examination other that the stooges paid to hype the economy, and therefore the market volatility would be very tradable both ways today. However, the market didn`t gap up on the report, but did open in line and formed a 6 bar range [5 min chart] between 1330.47-1327.73, and then B/O to new intraday lows and declined to 1312.89 on the 12:30AM bar, so the Trading Service members were liking that.
This is the day nine since the 1344.07 high, and despite all that is going on the SPX remains above the 8, 20, and 50DEMA`s, and the initial swing point low of 1294.26 has not been taken out yet, so there is no change in trend by definition, and the -3.7% decline from 1344.07 is not a real correction in an extremely extended market.
It is not surprising that this week has been volatile as the SPX has gone +0.6, -1.6, +0.2, +1.7, and is -1.3 while I complete this commentary at 1:25PM. In the Trading Service commentary after the close last Fri I outlined some key time symmetry for this week.
I stated that the SPX monthly 5RSI was 81.87 versus 78.47 at the April 2010 1220 high, which preceded a -17.2% decline to the 1010.90 7/1/10 low. Also, 3/6/11 is the 2 year anniversary of the 667 bear market low, and 3/4/11 is square root symmetry from the 10/11/07 1576 high. The square root of 1576 is 39.70, and 3/4/11 is 1240 CD`s from that 1576 high [31 x40] I also wrote that his current market has symmetry with the SPX 1935-1937 bull cycle, which was 727 CD`s and +131%. There are 727 CD`s from the 3/6/09 667 low to 3/3/11, and a +101.5% gain from 667 to 1344. The March seasonal probabilty is high in that here has been a correction of at least
-5.0% in the month of March for the last 10 years.
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