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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 declined -7.0% in 8 days to 888.86 on Tuesday, which was extended to the -2.0 STDV zone on the 3 month Linear Regression channel, as you can see on the chart. There was also symmetry with the 888 .236RT to 667 from 956, so traders in the service anticipated the reversal. It bounced to 910.85 yesterday, but traded down to a 900.94 close after the FOMC statement, which was basically a non event as they said that the Fed Funds rate would remain low for an extended period of time, as dictated by the slow economy. They also said that they will continue to purchase treasuries and mortgage backed securities, so there were no surprises.
NYSE volume yesterday was very light at 1.10 bill shs, with the volume ratio positive at 73, and breadth +1349, both of which are positive divergences to the SPX +0.3 gain, and the INDU -0.3 loss to 8300. The Techs led the market yesterday with both the QQQ, and COMPX, each +1.7 on the day.
The TLT has been trading inverse to the equity market, as you can see on the chart, and is now extended to the +2.0 STDV zone on the Linear Regression channel chart. There are 4 trading days left in the QTR, so the odds favor a Generals mark up of sorts into next Tuesday to finish the 6 month report card with an YTD gain above the 2008 close at 903.25. I also expect some choppy price action as the Generals adjust portfolio weightings.
The energy and materials sectors also got extended to the same -2.0 STDV zone as the SPX, with the OIH -19.2% in 8 days to the 93.69 low. It bounced yesterday to a 98.42 high, and closed at 96.04. However, traders were able to play the B/O of a 1st hour contracted volatility pattern for a nice chop, because the odds favored the bounce from the -2.0 STDV level, plus the fact that it had declined for 7 straight trading sessions.
I expect the SPX to trade lower than 888.86 before it trades higher than 956.23
Have a good trading day!
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