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 had declined four straight days last week to close at 887, and then had a +2.6% bounce on Friday attributed by the media to the CCI report, which essentially means nothing unless the consumers are spending money, and they "ain't doing that in any significant way folks".
I thought the report was a chance for the Generals to squeeze some shorts and start the month end mark up, which it did, but that came to a sudden stop yesterday as the SPX declined -1.9% to close at 893.06, versus the Tuesday close of 910.30. The NYSE volume was light at 1.33 bill shs, with the volume ratio at 20 and breadth -1251.
The major indexes spiked down on the 1:30 PM bar yesterday, along with the TLT which accelerated to new lows on the 1:30 PM bar as the Government auction did not go well. Yields have been rising for almost 4 weeks now, especially since the TLT broke down below Par (100). If the Fed can't keep the 30-Year mortgage rate from rising significantly, you can kiss this equity market goodbye.
The trading month ends Friday, and the SPX will remain above the April 872.81 close. The excuse for a bounce into Friday might be the Durable Goods report this morning, but the key right now is the Bond market, and the buying has picked up some this morning after yesterday's Auction decline. The 10-year Treasury note has been hitting 6 month highs and fell back to 3.68% from 3.75% in late trading Wednesday.
Our primary trading focus remains the energy, materials, and technology sectors, in addition to some of the defense and selected industrial stocks. In financial stocks the day trading is mostly confined to GS, MS, JPM, ICE, and of course the ETF's when they set up.
The key SPX price zone is still 923-950, with the 200EMA now 945. The OIH, XLE, and XLB are in key consolidation patterns at their 200DEMA's, as is the QQQQ, which closed above its 33.95 200DEMA the last two days. The SPX has been correcting sideways in the 930-879 range for the past 17 days, and this has worked off its extremely ST-O/B momentum condition. With most professionals now expecting a short term correction, and the major indexes and key ETF's consolidating at their 200DEMA's, the market is set up for a mini short squeeze by the Generals into month end and the first few days of June.
Have a good trading day!
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