What Will You Do Next Time?
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 hit another new high yesterday at 1049.74, and is now +57.4% off the 3/6/09 666/79 low in just 133 days. The rate of advance is 0.4312 per day, and that is the most since the June/1932-March 1935 ROA at 0.43.
 This bull cycle advance within a secular bear market started from a highly significant Fib key price zone to the 1982, 1974, and 1932 lows from 665-602, which included the .618RT`s to all three of those historical lows. It has also been a spike rally from the “Panic of 2008” spike down, which was, and still is, a Derivative Meltdown of unprecedented magnitude, with more to follow, especially if this administrations mandates are passed as proposed.
The average SPX daily range continues to narrow during this rally, which is evidenced by the rising wedge, and there is now a 3 up and 3 down negative momentum divergence as you can see on the SPX daily chart, so it is obviously not a technical buy point. It used to take cash to move a market up, but not anymore as the market can be manipulated by programs (PPT), the built in long bias of ETF buying, and also the current strict enforcement of the Short Sale Rule. This is evidenced by the continued low volume as the SPX is pushed higher.
Most long term investors that rode the 2000-2002, and 2007-2009 bear markets down will probably do the same thing the next time around, but just maybe some will be thinking about preservation of capital this time, and have a plan to avoid another -50% decline, which requires a 100% gain to get even. If your broker did nothing on the sell or hedging sides for you in the previous bear markets, than it might be wise to get someone else (nice way of saying it).
The SPX rising wedge with narrowing daily range has resulted in many contracted volatility opportunities for day traders, and I will cover this in the next commentary on Thursday.
On the Thursday 12:30 PM free trading call (open to everyone) I will review my outlook for the extent of this secular bear market rally, and some thoughts on exit strategies.
Have a good trading day!
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