Traders Focus on Commodity Sectors

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 made an 864.30 intraday high yesterday which is a +29.6 advance in 26 days from the 3/6/09 666.79 low at the key 665 price zone, which is the .618RT to the 1982 bear market low. The .707 Fib RT to 944 from 667 is 863, and the SPX has churned at each of the previous RT zones at 805 (.50, and 838 (.618). There are 41 trading days from the 1/6/09 high of 944 to the 3/6/09 low of 667 and 26 days to 4/13 so it is the .618RT in time from, and including that 3/6 low. The other more significant time symmetry for this week is outlined in the 4/6/09 trading service commentary, which you can access in the archives with a free one week trial to the service.

WTIC Chart

The market is extended in both price and time, and there are significant momentum and sentiment negative divergences, all of which is one big red flag warning for those of you that missed the key price and time zone in March, not to buy the hype and enter this market at these levels. You will be better served by waiting for the retracement, followed by a new high, which would indicate a W3 leg and continuation of the bull swing within this secular bear market.

GYX Chart

However, I don’t think this market has any chance of taking out the 1576 10/11/07 top in the next 5 years, let alone be a 5 year bull market like we had under President Bush from 10/2002-10/2007. I expect it to be more like the 70’s because we are headed for a prolonged weak economy and higher inflation based on what Congress and the Obama administration has enacted so far, with more to come in 2009, followed by the biggest tax increase in history in 2010 as the Bush tax cuts end, right on top of an economy that may or not be recovering, in addition to the $trillions of debt that will put this country on the brink, more than it already is right now. The current administration and the Fed has bet the country on Keynesian economics, and that has a proven track record of absolute failure, and it won’t be any different this time.

DBCMO Chart

The Shanghai composite has a very high correlation to the price of oil and other commodities. It preceded the decline in crude oil, and is now in a strong intermediate uptrend having bottomed in November, so that bodes well for the energy, materials, and metals stocks. Copper has also made a 123 higher bottom, which is a bet by some that the economy will pick up. Day traders should make the commodity sectors a primary focus, and ETF position traders should look at the DBC that made an 8 (Fib) month low in March at 17.94, down from the July 2007 46.63 bull market top. The 3 month EMA has hooked up from an extremely O/S condition, so a trading position is being established.

The next commentary is Thursday (4/16)

Have a good trading day!

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