Sector Catalysts for SPX New Lows

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The $SPX made new intraday lows to 1320.04 on the 2:50PM bar, and then from nowhere came a move that took the $SPX up to the 1331.34 marginal +.05 close. However, for daytraders this was the second RST long profitable opportunity on the day. The other major indexes all closed on the minus side, led by the Nasdaq 100 ETF (QQQQ | Quote | Chart | News | PowerRating) (-0.7%) Energy and many commodity related stocks like Freeport McMoran (FCX | Quote | Chart | News | PowerRating), Monsanto (MON | Quote | Chart | News | PowerRating), and Arch Coal (ACI | Quote | Chart | News | PowerRating) finished green, with the Energy SPDR (XLE | Quote | Chart | News | PowerRating) +1.3%, AMEX Gold Index +3.2%, and Materials SPDR (XLB | Quote | Chart | News | PowerRating) +1.7% NYSE volume was 1.57 bill shares, with the volume ratio 46 and breadth -280.

Despite all the spin by the pundits, Fed, and Administration, the derivative meltdown and credit crisis continues to expand, and this will result in new bear market lows as the $SPX 1270.05 low gets taken out. The low close in this decline is 1310.50 (1/22/08) while the 1270.05 low was 1/23/07, just before 1:00PM, followed by the “mystery move” that carried the $SPX to a 1338.60 close that day. If you don`t think that was the PPT (Plunge Protection Team) at work, I have a bridge in Brooklyn you can buy. The financial stocks declined for the third straight day with the $XBD is -9.9% and $BKX -9.3% Both Morgan Stanley (MS | Quote | Chart | News | PowerRating) and Lehman Brothers (LEH | Quote | Chart | News | PowerRating) made new bear market lows yesterday while the NYX (NYSE Euronext) also made a new bear market low. This market action does not indicate that 1270.05 was the bear market low. The energy and commodity stocks have been holding this market up and are now obviously very extended as the “herd’ all chases the same stocks for lack of anything else to buy. A sell off in these sectors right now would be a catalyst for new market lows. The brokers have attempted to spin the technology story once again, but one look at the QQQQ daily chart tells you nobody is listening yet.

It will take more than spin by the Fed to prevent another meltdown move in the major indexes, and the news catalyst will be derivative/credit crisis related. The $GOLD futures closed at 983.68 yesterday, so the odds are very high that the $1000 magnet gets taken out with the current weakness in the $US dollar index, which closed at 73.68

The $SPX futures are -11.5 points as I complete this commentary at 8:10AM ET, with the Intel (INTC | Quote | Chart | News | PowerRating) and Citigroup (C | Quote | Chart | News | PowerRating) news as the main culprits, so the extended volatility strategies will be the first thing in play for daytraders this morning.

Have a good trading day!