Read Larry Connors' blog – Short Term Trading Strategies
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 923-950 contracted volatility range was expected to be resolved to the downside on the week ending 6/12, but it was a couple of days late, and closed at 911.97 on 6/16. I said the odds favored a higher close into Friday above the 6/17 903.78 low, which it did at 921.23, then made an 893.04 low (-3.1) yesterday, and closed there. The $US dollar advanced, which sent the energy and materials sectors south again, and that was accelerated by the World Bank statement that they didn't see the same "green shoots" as the empty suits on CNBC, and the spin masters in the Obama inner council of "comrades". Also, the Monday "triple witch" expiration is down better than 60% of the time. The financial stocks also took a hit with the BKX -6.7, while the OIH was -6.5, XLE -5.0, and XLB -5.1
In the previous commentary I said that contracted volatility usually preceded sharp moves, and with the SPX in a 10 day narrow range at the 200DEMA it could have gone in either direction, but the odds favored a decline after the +43.3% advance in just 67 days to the 956.23 intraday high last week. NYSE average weekly volume had declined for 3 weeks from 1.48 bill shs to 1.09 bill shs the week ending 6/12, and the 956.23 high, followed by 1.37 bill shs last week, which was inflated by the 2.13 bill shs on expiration Friday. Yesterday, the NYSE volume was 1.4 bill shs as the SPX finished down -3.1% to 893.04.
However, although I had expected the 923-950 range to be resolved to the downside, I still expected the Generals to mark up their major holdings into the end of this QTR (news permitting) which has 6 trading days remaining. The SPX went negative on the year yesterday closing below its 903.25 12/30/08 close, but I expect the SPX to close higher than that on 6/30/09. I also think that after Q2 ends there will be at least a .382 RT to 667 from 956, which is 846, but most likely lower to the .50-.618 zone from 812-777.
Have a good trading day!
Click here to find full details on Kevin's courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin's daily trading service, click here.
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