Trading the Market Symmetry
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 market confirmed a short term downtrend with the 123 lower top trend continuation move below 888.86. It also took out the 878.79 HS neckline as it traded down to an 869.32 low last Wednesday (07/08/09). The SPX, as anticipated, reversed in the 923-950 key price, time, and momentum zone.
In the previous commentary last Thursday, I said the market hit a short term O/S condition with the 869.32 low, as the 4MA’s of the volume ratio and breadth were 23, and -1342. I also said the odds favored a bounce no later than this Wednesday.
The trading service members had the added benefit of knowing that 6/13 was a key long term time date, and was also 21 days (Fib) down from the 956.23 6/11 high, and 13 days (Fib) from the 888.86 previous swing point low on 6/23, in addition to 6/14, and 6/15, being 89 (Fib) and 90 (Gann) days from the 3/6/09 667 low, so the odds favored a reversal. It was just a question of whether the SPX hit the 846 .82RT zone (956-667) before the bounce or not.
The important benefit of understanding the time symmetry from 6/13-6/15 made it easy for day traders to take advantage of the 1st Hour Reversal strategies yesterday such as the SPX Trap Door, and RST’s in ETFs such as the OIH, XLE, and GDX, in addition to some of yesterday’s focus list stocks like KLAC, SLB, and ESV to name a few.
I still expect the SPX to hit at least the 846 .382RT zone after this ST-O/S bounce. There will be lots of positive uninformed earnings hype from the empty suits on CNBC, which will result in erratic price action, but the short term downtrend has some more legs, and that is a good thing if the market is to get some ammo for any sustained move above 956, which I still feel is a very high probability.
However, the earnings and job hype will not change the growing trillion dollar deficits and unsustainable debt levels which are raising inflation expectations, and putting upward pressure on long term yields, including the 30-year mortgage rate, which is significantly hurting the Fed’s easy monetary policy. Consumers are not spending, and Banks are doing only very selected lending, so until that changes, the market is limited on the upside as perception can only carry it so far without some actual positive results.
Have a good trading day!
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