Kevin Haggerty is a
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It was another fear day similar to the 2/27 China market decline where the SPX
finished -3.4% to 1400 on New York Stock Exchange volume of 2.3 billion shares,
a volume ratio of just 1, and breadth -2463. The difference yesterday was that the
SPX which was -3.5% at one point bounced off the 1465.30 intraday low and
support zone to close at 1482.66 -2.3% as was the Dow ($INDU) to 13,474. The
QQQQ was -0.9% to 48.98 and the Nasdaq Composite -1.8% to 2,005.99. The
technology's positive seasonality was anticipated in early July and that is where
it started and it has for the 3 of the last 4 years with one year starting in
early-August. NYSE volume yesterday was 2.1 billion shares, with the volume
ratio was at 1 and breadth -2905. The financials led the downside most of the day just
as they did on 2/27. The four MAs of the volume ratios and breadth are extremely
short-term oversold at 28 and -1582, with only three trading days left in the
month. There will be buyers on significant weakness approaching yesterday's
lows. There were negative divergences in the internals and momentum as the SPX
hit new cycle highs the week ending July 20, 2007. In that July 20 commentary, I
said those weakened internals would come into play the week following expiration
which they obviously did on Tuesday with the SPX -2% and the -2.5% yesterday.
In the past three commentaries (7/20, 7/23, 7/25) I have outlined the
negative implications of the declining U.S. Dollar, rising crude oil prices,
spreading sub-prime problem, slow economy and housing market, in addition to the
LBO bubble rolling over due to the funny leverage in the deals and the fact that
the spread between junk bonds and treasuries was down to 2 percentage points
versus a 10 percentage point spread in the last 2002 bear market cycle low zone.
To keep it in sequence up to yesterday's decline, you should read the three
commentaries which you can access in the archives from the top right corner of this
page.
Traders capitalized on long contra-moves from the -1.5, -2.0, and -3.0
Volatility Band Zones. The best move was in the last hour from the 1465.30 SPX
low which had symmetry with the 1461.57 February 22, 2007 last significant top
and also 1460 which is the 0.50 retracement to 1364 from the bull cycle high of
1555.90. The SPY made a 146.41 low yesterday yesterday versus its 146.42 high on
February 22, 2007 so it bounced right off the number. The SPX ran from a 1469.40
entry to 1486.89 before close 1482.66 -2.3%. My guess is that the PPT (Plunge
Protection Team) was probably also involved in this bounce. The pre-market SPX
futures are down 10 points as I complete this commentary at 7:45 AM ET so maybe
we will get lucky and get another extended volatility move down today which we
can capitalize on. In the July 25th commentary, I said that the SPX was on life
support with the financials in a confirmed downtrend having taken out the March
14, 2007 lows with the BKX and major brokers like Merrill Lynch (MER), Bear
Stearns (BSC), Lehman Brothers (LEH, Morgan Stanley (MS) and Goldman Sachs (GS)
all trading below their 200-day EMAs. Nothing good can happen to the market if
the financials can't reverse the downtrend that started on February 20, 2007 for
the BKX, January 18, 2007 for MER and BSC, LEH on February 7, 2007, while MS hit
its cycle high on 6/15/07 and GS on 5/31/07.
Check out Kevin's strategies and more in the
1st Hour Reversals Module,
Sequence Trading Module,
Trading With The Generals 2004 and the
1-2-3 Trading Module.
Have a good trading day,
Kevin Haggerty
