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The Next Key Market Reversal Zone
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 has declined -5.3% high to low since the 1150.45 rally high last week (1/19), and went out yesterday at 1092.17 (-0.4%). In the previous commentary (1/26) I said that the highest probability is for lower prices below the 50DEMA as the market does not like uncertainty, and that the financial stocks will continue under pressure.
The uncertainty is the proposed bank tax, and his second proposal will essentially push the banks and Wall Street back to pre Glass Steagall relative to regulation if passed, some of which might be good, but most of it does not address the real problem. The market obviously did not buy it.
The FOMC can hardly raise rates today based on the very weak economic recovery, and then tonight is Obama's State of the Union speech, which is nothing more than a "3-card monty game" as the socialists pretend to switch their spots after the Brown victory in MA, and have hit panic mode about the 2010 election.
Friday is month end, and the SPX is -2.1% MTD, so it wouldn't take much of a bump by the Generals to finish the month on the plus side, but the other catalyst could be the PPT (Plunge Protection Team) manipulating the market through the futures after the Obama speech. The market is very ST-O/S so it wouldn't take much of an effort.
There is price symmetry on the downside at the 1084.10 .236RT to 869.32 from 1150.45, and 1083.61 is the 180 degree angle from the 1150.45 high. However, the key buying zone is 1046-1040 which includes the key longer term EMA's, in addition to the .382RT at 1043.06 and another angle at 1042.86.
This would be the first pullback to the 200DEMA etc since a new cycle high, so it is obviously a key reversal area watched by all, and the "herd" will be on the buy side. However, the market rarely does what the "herd" wants or expects, and a reversal will most likely start above or below the 1046-1040 zone, so I will take a scale in long position.
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.
