Haggerty: Do You Have a Play?

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 took out the 10/21/09 1101.36 high on Mon and closed at 1109.30, with a new intraday rally high of 1113.69, or +67% from the 666.79 3/6/09 low. If you have been following this rag sheet for a while you know that the plan was to scale sell 1/3 of the long term scale down index proxy position bought in Feb and Mar 2009, and that was completed on Mon.

The secular bear market started  with the 2000 Tech bubble bull market top, and the first SPX bull cycle within the secular bear market was +105% off the 769 10/10/02 low. That economic recovery included tax cuts which, by the way, enabled the Gov't to collect the most tax revenue of all time, and the same was true with the 15% capital gains tax.

Fast forward to the "Panic of 2008", which was the first one in over 100 years, and now you have a Socialist administration trying to solve the problem by ringing up $trillions in debt and deficits, with plans for the biggest tax increases in history in the face of an economy that has a higher probability of depression right now rather than recovery, like we had in 2002-2007. The Socialized medicine, and Cap and Trade proposals are probably the two most dangerous pieces of legislation in history, and will bury our economy for years to come if passed in current form.

On top of that, if the current proposed legislation passes, which effectively puts the Treasury Secretary in charge of the Fed, and therefore takes away its independence, and puts the politicians totally in charge of our financial system, seeing that the Treasury Secretary meets regularly with the President, I have some used tents and cases of C-rations you are going to need.

The bottom line is that the next equity market cycle down in this secular bear market will also be devastating, based on what the Administration is currently doing, and not doing to solve the derivative meltdown. This means a strict buy and hold strategy will bury most investors as it did the last two secular bear market bear cycles of 2000-2002 (-50.5%) and 2007-2009 (-57.7%). The secular bear markets have a life of about 17 years, and strict buy and holders don't make money, which was the case from 1965-1982, and will be again from 2000-2017. However, in a secular bull market, the buy and hold investor wins the game, as it did from 1982-2000.

Are you in La-La land that you think this socialist administrations policies are going to lead you to the Promised Land, or do you have a strategy to protect your capital as the market trades higher, which I still think it will, at least to the 1229 zone, which is the .618RT to 1576 from 667. 

The next commentary is Tues 11/24 

Have a good trading day!

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