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 finished the week +2.2% at 1135.68, in spite of the -1.9% day on Friday. It is all about the Euro which made new lows and took out the 123.94 2008 low last week. The EU bailout of the banks [although they say Greece] is expected to do no more than postpone for a few years the inevitable debt collapse in Greece, Portugal, Spain, and possibly Ireland.
The USA and Germany equity markets are marginally profitable YTD as of Friday, while Greece is -29%, Italy -15%, Portugal -14 %, France -10%, and don’t forget the bear market in China where the Shanghi Composite has declined about -25%.
However, that is not a problem for China because they are not facing a sovereign debt collapse like Europe is now, and the U.S. will be in a few years under the status quo. China sees it coming and has been shortening its maturities on the U.S. treasuries that they hold, and Japan is now the primary holder of our U.S. long term debt. The initial reaction to the EU sovereign debt default is to buy the USD, Gold, Treasuries, all of which we see now, and we could also see the foreign capital seek temporary haven in U.S. equities.
If the devastating path that Obama has us on isn’t changed soon, the U.S. will face the same debt problems as Socialist Europe, and being a debtor nation, who in the hell is going to buy our debt when there is little confidence that we can support it.
The market has been in a daily knee jerk reaction mode to each bit of news for the last 3 weeks, and the SPX has advanced or declined 1.0% or more on 11 of the last 15 trading days as of the SPX 1135.68 close on Friday. The Asian markets were down overnight and the SPX futures got down to about 1120, but then rallied to 1140 as Europe advanced, but have backed off to 1131 as I complete this commentary. We can expect to see more of this knee jerk volatility, and it definitely favors day trading over swing trading.
The SPX made an 1126.14 low Friday versus the 1132.40 .38RT to 1065.79 from 1173.57, with the .50RT at 1119.68, .618RT at 1106.96, and the 200DEMA at 1102.30. Most expect buyers to get aggressive on a pullback to the 1107-1102 zone. I expect the SPX to trade back above 1200 by Labor Day despite the EU’s sovereign debt problems.
Have a good trading day!
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