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 finished last week at 940.09 (+2.2) which is in the key price zone of 923-950, and other than the new rally high of 951.69 on Friday, all 5 closes were within the range, as was the price action. The most significant price action last week that can derail the rally was the continued rise in bond yields, and the 30-year mortgage rate rising to 5.45 Also, crude oil is being "gamed", and it traded above $70 last week as gas at the pump hit $3.00 per gallon in various states.
The Fed wanted to keep that 30-year mortgage rate below 5.0, in addition to keeping consumer rates low, but that is not happening folks, and it is obviously a significant negative to turning around the housing market, and efforts to accelerate the economy out of this "Derivative Meltdown" recession. Also, if new accounting rules are implemented that would require institutions to move off-balance-sheet assets onto the books, it would expose the insolvency of some of the familiar major financial institutions, because those bad assets total a few $trillion dollars at least.
If Obama gets his way, and then also gets elected for a second term, there will be $trillion dollar deficits for the next 10 years, so who in the hell wants to step up and buy U.S. debt now at these low relative interest rates, versus the projected deficits and inevitable train wreck in our future.
The declining $US dollar has been giving strength to the commodity sectors, and any significant upside reversal could be the catalyst for a correction in the SPX, which would be the Wave 2 decline. This would also set up an inverse H&S, which the "pundits" would spin, and then the higher probability would be for a Wave 3 up. This market is much to extended in price relative to time, and is looking much too far ahead based on reality. However, despite these obvious negatives, the spin will be strong enough to initiate a Wave 3 move.
The comedy of the week is Obama spinning the "create or save" 600,000 jobs, and then turning to Biden and saying "isn't that right Joe." It was a real "Heckle and Jeckle" show, as is the spin about "saving jobs" which is the same kind of B--L S--T estimate as the birth/death rate adjustment in the jobs report by the Bureau of Labor statistics.
The SPX has been in a 6 day range from 923-950, and I expect that to be resolved this week. If the $US dollar rallies I expect it to be resolved to the downside.
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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