The S&P 500 made a significant one day reversal today, and may be signaling the short-term correction we have been waiting for. Still, I don't expect the correction to fall too deep with the worst case scenario at 975 (~10% correction). I reiterate my view that we already bottomed in March and believe that a consolidation in time will make up for a huge correction (20% to 30%) that most pundits are calling for. Expect support levels at 1,037 initially, then 1,005. I still recommend a range trading strategy. Oil also fell and the US dollar rallied, consistent with my prediction in "Oil and Dollar: A Harbinger of Things To Come?". To reiterate, oil is in a distribution pattern and may test ...

Markets were up slightly once again on Friday. But while managing to hold, markets have lost a little momentum the past two trading sessions. The S&P 500 chart has already broken above its rising channel pattern (green and red slopes), but it is lacking a leg for a full five-point reversal. Because of this, we think that resistance won't likely turn into support, and the market will fall back into the pattern for the meantime to finish off its duration. The MACD also indicates an overbought level as of the moment. I still won't short this market though I feel the desperate bears are already getting giddy... What does a five point reversal mean anyway? Whatever consolidation pattern a stock or index is in, the ...

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There are many institutional S&P 500 forecasts in the media for 2009, generally ranging from 850 to 1100 with some outliers on each side, but seldom is the underlying detail provided.  One of the more common methods of estimation involves normalization of earnings times a reasonable multiple based on history.

This article will attempt to back into some of the leading institutional projections using normalized earnings and historically experienced multiples.

Key Historical Index Price Levels:

The S&P stands now at 946.  It had a low of 741 last November and 666 in March. The high in 2007 was approximately 1575.  The low in 2002-2003 was approximately 770.

Institutional Estimates:

We cataloged a number of institutional forecasts in a recent article.  The forecasts here come from that article plus a few newer ones.  Estimate publication dates range from early May through now (issued within approximately a month).

Goldman this week stated an expectation of 950

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Sometimes accepting “what is” happens to be counter intuitive. That’s the way it feels right now with the DJIA above 8,700 as I write and the S&P 500 at 945. The trend for this bear market rally is powerful and it will be meaningful to see how far it goes.

From a technical standpoint some important indicators such as breadth, advances versus declines, volume and moving averages are signaling that this rally has a ways to go yet. The markets are shrugging off the GM bankruptcy and other bad news, at least for now.

One of the better technicians that I collaborate with is my friend Richard Wendling who writes the ever-interesting web site The Bear Facts Specialist Report at :

http://www.bearfactsspecialistreport.com/.

I sincerely encourage you to read his May 29th NYSE Dow Jones Market Report http://www.bearfactsspecialistreport.com/. Richard believes that if the DJIA can break above and close above 8,700 that the next

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          And what exactly did you say a chart BREAKOUT looks like?  

 

The S&P 500 broke out above its 200 SMA (TANKS) today to join the NASDAQ.  The DOW tapped its 2oo TANKS intraday and then pulled back. The move by the S&P was its first move above the 200 TANKS in 359 trading days!  This on a day when GM declares bankruptcy. 

Have you not figured out yet that the market acts  just like a rebellious teenager and does just what she wants to do whenever she wants to do it!?!

 

SHOULD WE BREAK OUT THE CHAMPAGNE?

A SIGN OF RECOVERY?

AND THE BEARS SHOULD NOW BE BULLISH? OR GET SLAUGHTERED?

FORGET ABOUT GM. IT IS THE POSITIVE NEWS THAT

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We’ve all experienced times of impatience and anxiety when over the course of several days or weeks a deadline for action looms.  A decision has to be made for a particular project or possibly a life changing event, if for no other reason than to save our sanity. 

The same happens in the stock market.  Emotions among traders and investors create supply and demand, moving the markets in one direction or the other depending on the sentiment of the majority. Then comes the time when no clear direction has been established and thus a decision has to be made and made soon.  The question then becomes: who is going to make the first move?

NOW IS THAT TIME!

Let’s look at one chart, the S&P 500 which, by the way, has not

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The comments below were provided by Kevin Lane of Fusion IQ.

The S&P 500 Index, after stalling below resistance for much of May, has now slipped below its lower channel line and is testing price support again at the 875 level. If the 875 level is violated the market will become more defensive and expect selling to materialize quickly as traders will look to lock in remaining profits from this rally.

At this point we do believe any selling that materializes on a breaking of the aforementioned support zone would be fairly short-lived and the price drop relatively shallow (10 – 15%). We further believe if this selling occurs it will be part of a market retesting phase and would set up another buying opportunity since there isn’t a lot of supply left after the near eight months of continuous selling from August 2008 into the March

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Here is the 200-day primary trend line of the S&P 500 showing its prolonged and continued downward movement (bear market condition) along with the position of four secondary trend lines that must move above the primary trend line before the primary trend changes slope from negative to positive.

Those staging into risk positions in the US stock market would be well served to monitor these key visual clues about the eventual transition from the current bear to a future bull when deciding how much and when to commit cash for an intended ultimate position size:

(1) the slope of the primary trend line

(2) the location of the secondary trend lines (whether above or below the primary trend line)

(3) the direction of movement of the secondary trend lines

(4) the relative position of the secondary trend lines above or below each other.

click image to enlarge

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The S&P 500 index (proxy SPY and IVV) is in much better shape now than on March 6 (the low so far, and maybe the low).  However, not all lights are flashing green yet.

First at the macro level, SPY shows that the 200-day average and the 50-day average were both sloping down on March 6.  Today the 50-day is sloping up, but the 200-day is still in a down trend, and the 50-day is still below the 200-day.  That shows improvement, but it’s not a certain bull.

The SPY 200-day average was 104.57 on March 6.  It is 92.95  today.  The 50-day was 82.24 on March 6, and is 84.89 today.

SPY on March 6, 2009

Except for truly brave souls, prescient fundamentalists, veritable long-term risk takers, those who believe it is impossible to die falling out of a basement window, those who had

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