Market Rises as Reality Weakens

Kevin Haggerty is a full-time professional trader who was head of trading for Fidelity Capital Markets for seven years. Would you like Kevin to alert you of opportunities in stocks, the SPYs, QQQQs (and more) for the next day's trading? Click here for a free one-week trial to Kevin Haggerty's Professional Trading Service or call 888-484-8220 ext. 1.

There was very little market action to evaluate from Thursday, with the SPX daily range at just 4.8 points, before closing at 1456.81 (+.01%). There were 3 days down into Monday's 1431.44 low, and now 3 days up to yesterday's 1457.97 intraday high. There was some Federal Reserve hype this week, in addition to some options expiration activity, until yesterday, when the NYSE volume dropped to only 1.38 billion shares with the volume ratio 57 and breadth +597. The only sectors red were energy, with the OIH -1.9%, XLE -0.9% and the $TRAN -0.3%. Gold advanced for the third straight day, with the $HUI +1% and +3.7% over the past 3 days. Gold advanced as the $US dollar declined for the third straight day. The Fed has flooded the market with liquidity, and this has fooled nobody except the US media, certainly not foreign investors who read it as inflationary to go with slow growth in spite of what the Fed says about how strong the US economy remains. The $US dollar closed at 84.02, and the probability is increased that it will make new lows in 2007. Also, the bulk of earnings season is in, and I read in a summary that 67% of the companies reported lower expectations in their forward guidance, which is the most in 8 quarters. Of course, when they report the next time, it will be "XYZ Corp. beats expectations by a penny," but there will be no mention in the media of the greatly reduced expectations prior to the "better by a penny" BS, which means bumpkus. Equity markets don't like slow growth and high inflation, and despite reports to the contrary, that remains the highest probability right now.

Daytraders were handicapped by the SPX narrow range yesterday, but had better results with the OIH, XLE and some of their components, which had declined early to their -1.5 VB zones. The contra moves from the zone was profitable, but was not a significant reversal. The sector will continue to be volatile for obvious Middle Eastern reasons, but there is certainly a difference of current opinion by some analysts. Sanford Bernstein & Company came out on Wednesday and said that oil could drop to $40 in March 2007, and may even drop to $30 some time this year. The contra side is Goldman Sachs, which said that NY futures could rise to 71.50 a barrel this year (it reached 78.50 on 7/14/06). Goldman also said in December 2005 that oil prices may go as high $105 a barrel in a spike that may last until 2009 (source Bloomberg). Regardless of how it plays out, the volatility will continue to benefit daytraders the most.

See the 2/12/07 commentary for current market timing symmetry.

Have a good trading day,
Kevin Haggerty

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