This Is Not Money Managers' Favorite Theme

Kevin Haggerty is the former head of trading for Fidelity Capital Markets. His column is intended for more advanced traders. If you would like to learn how Kevin trades, you can find more information here.

The major indices were all green yesterday as the SPX ($SPX.X | Quote | Chart | News | PowerRating) was +0.7% to 1244.12, a new closing high, with range expanding to 9.3 points. The Dow ($INDU | Quote | Chart | News | PowerRating) was +0.6% to 10,684 and continues in a 1.4% range since 07/14 between 10,718 - 10,573. The (DIA | Quote | Chart | News | PowerRating) range is 107.16 - 105.64. Led by the semis, the (QQQQ | Quote | Chart | News | PowerRating) was +1.1% to 40.08, and the Nasdaq ($COMPQ | Quote | Chart | News | PowerRating) closed at 2218, +1.0%.

The semis led the primary sectors with the (SMH | Quote | Chart | News | PowerRating) +2.8% to 38.28 with the .618 retracement to the 45.67 bull cycle high on 01/08/04 at 38.92. It is also at the nine-month +2.0 standard deviation level with the +3.0 band at 40. The SMH is +28% from the 29.87 04/15/05 low. Energy had another strong day with the (OIH | Quote | Chart | News | PowerRating) +2.3% as crude oil closed at 61.89, +0.5%, which is a new closing high after the Generals' Pullback when the OIH hit an 84.16 low at a rising long-term EMA on 05/16/05. The OIH closed at 117.08, +39% since that Generals' Pullback position trade setup.

NYSE volume expanded to 1.52 billion shares with a volume ratio of 70 and breadth +1122. The 4 MA of the volume ratio is now 59 and 4 MA of breadth +600. There is a negative divergence in the SPX 5 RSI since the 07/15 80.9 to yesterday's 68.2. The XLB was +1.5% yesterday, led by (AA | Quote | Chart | News | PowerRating), +3.1%, and (PX | Quote | Chart | News | PowerRating), +2.1%, and is now pushing the high end of its 29.10 - 26.70 (Double Bottom) range since 04/14/05. It closed at 28.93 with a 29.06 intraday high (see chart). The initial retracement levels above the range are 29.35, then 30. Some of the basic materials stocks, like AA, (DD | Quote | Chart | News | PowerRating) and (IP | Quote | Chart | News | PowerRating) remain "Below the Line."

The (TLT | Quote | Chart | News | PowerRating) remains under some selling pressure, closing at 92.12, -0.3%, with a 91.96 intraday low (see "China Revaluation", 08/02 commentary). The US Dollar was -0.1% to 88.74, while gold was +0.7%. Rising crude oil and gold prices with a declining US Dollar and rising bond yields is not the scenario money managers look favorably on if this trend gains any momentum. As of 7:30 a.m. ET this morning, I see that crude is trading up to 62.34 and gold +1.6 points to 439.30 while the equity futures are small red with the Dow -9, S&Ps -1 and Nasdaq -2. That will obviously change prior to the open.

Have a good trading day,

Kevin Haggerty

P.S. I will be referring to charts from www.thechartstore.com in the future.