Here is a daily chart of the December e-minis going back to the May 2, 2011 top. As you know I think the S&P is in the middle of a bear market which will probably drop the average to 950 or so.Last week the market put in a low at 1068 and has since staged a fast rally. I think this rally is going to stall near resistance which stands between the August 31 top at 1224.00 (green dash line) and the June 16 low of 1246.50 (red dash line). The target area is delimited by the green oval.
My best guess is that the rally top will be in by the end of October. At that juncture I think the market will begin its next down leg of this bear market. The first one dropped the S&P about 300 points. If the second one starts from 1250 and drops the market another 300 points it would carry the S&P to 950.
2 comments:
Thanks Carl for the update!!
Given the extent of the rally over the past week, I now think that the low of the cyclical bear market ocurred on October 4. The S&P 500 was only 6.3% above the July 2010 intraday low (4.5% above the closing low).
I think that the downturn subdivided into two separate declines. The first one was from May 2nd - June 16, and the second during July 7 - Oct. 4. Cyclical stocks such as financials, housing stocks, industrials, and materials stocks were down 30-50% from their bull market highs. These are recession-magnitude declines, and with a double dip recession unlikely, the market has already priced in something worse than the reality.
While I think a bull market uptrend is underway, the first half of it is probably going to be very erratic with sharp, frequent pullbacks and corrections given the macroeconomic environment.
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