Tuesday, December 21, 2010

S&P500 reached my bullish target for 2010

S&P500 Mid-term target (From my September,13,2010 post) : "Click on the chart to zoom in."
Back in September 13th 2010 click here. I gave a bullish scenario to my bullish fans. At the time I thought my forecast is too optimistic, but market proved me that with "Bernanke's Put" ($600b QE2) anything is possible. My target for IH&S (inverted head and shoulder) is 1254-1260. I'd like to see what big institutions are going to do when S&P500 would reach these levels. Big institutions could over shoot the market to 1300 level, but 1254-1260 is a very reasonable level for 2010 high. In the short term pay attention to 1232.56 support level. If S&P500 tanks below 1232.86 it means we are headed to retest 1228-1220. As I mentioned many times before as long as S&P500 stays above 1228 bulls will have the upper hand.

Monday, December 20, 2010

S&P500 Should Move Sideway In Second Half Of Dec

Equity Markets usually move side ways or slightly higher in second half of December. Trading volume should be very low because big guys are gone for vacation and won't be back until first week of January, therefore we should not witness any violent moves. If S&P500 tanks below 1232.86 it means we are headed to retest 1228-1220. As I mentioned many times before as long as S&P500 stays above 1228 bulls will have the upper hand.

I would use US dollar as a reliable precursor for market moves in next 2 weeks. Pay attention to 80.63 as first line of defence dollar bears are going to short the dollar at this level, if dollar get above 80.63 it means it has potential to rally to 82.62 or as high as 83.71.

US Dollar technical analysis chart:

Base on my analysis if dollar stays above 80.63 for 2 days it means S&P500 will tank to 1228-1220. I expect a big fight at 1228-1220, between optimists and pessimists. On Elliot wave analysis; we are in sub-wave (5) but it is possible that sub wave (5) continue as high as 1300 (see the chart [Alt]:5).

S&P500 technical analysis chart:

As you know by now I'm a contrarian analyst therefore I'm going against the crowd, everybody is bullish therefore I'm looking to short stock and go long treasury as soon as I could detect some weakness in market, please note this is a swing trade not a position trade.

The only thing that has potential to take the US stock market down is European crisis. Despite IMF bailout of Greece, bond vigilantes are causing the Greece 10 year government bond to move higher it yield 11.9048% . As financial analyst I would say, game over for Greece. They don't have any chance anymore they are going to default with in a couple months. Bond traders are asking for 8.45% yield to lend money to Ireland for the next 10 year, after ECB (European Central Bank) announced that they are going to bail out Ireland 10 year bond yield fell from recent high of ~9.47 to ~7.95, but in recent days it started to move higher. We are witnessing the exact same scenario for Portugal 10 year government bond; it fell from ~7.20% to ~5.80% and in recent days has move higher. It would be interesting to see what is going to play out in Europe when Spain government bond get above 9%.

Spain 10 year government bond yield from 1993 to 2010:

Wednesday, December 15, 2010

Pay attention to 1228 support level

Market has became extremely overbought therefore a pull back to 1228 is absolutely constructive. You should get nervous if S&P500 tanks below 1208.
I've talked about the importance of 1228 level in S&P500. As long as S&P500 stays above 1228 bulls should have the upper hand.

Sunday, December 12, 2010

David Stockman "Tax-Cut Deal Is Bad Policy"

David Stockman former Reagan White House budget director says the tax deal emerging in Washington is "Keynesian flimflam" that won't help stimulate the economy. In an interview with Simon Constable, he rails against the current system of deficit financing and warns the U.S. faces a crisis of indebtedness in the long run.

Tuesday, December 7, 2010

1228 The Key Level In S&P500

If S&P500 stays above 1228 it means we are going higher. This week is option expiration therefore next couple day would be very volatile.
1228 is the most important resistance of 2007-2009 bear market. I would not get into thought prosess because it gets too complicated. All you need to know is that 1128 is critical for bulls.
In technical analysis, we consider 1228 as the key level. Technicians believe if market gets above it S&P500 will shoot for the previous high (2007 high).
The way I react to 1228 is different from other analysts. I believe if market stays above 1228 for a couple days it would be very bullish.
Please note that big institutions usually send the stock above key levels for a day or two to trap average investors before sweeping the chair beneath their foot; and sending the market lower.

Thursday, December 2, 2010

S&P500 Technical Analysis (12/02/2010)

S&P500 Technical Analysis Chart:
I'm looking for a pull back to 1211. There are 2 scenarios could come to play:

1) Continuation: S&P500 could continue to move higher with out any pull back; it could take out the 1228 resistance level and shoots higher. I give 10%chance to this scenario.

2) "U" shape move: market could tanks to 1211 then by end of the day, S&P500 rallies hard and gets above 1221.53 it would be very positive. I give 80% chance to this scenario.

Please note there is 10% chance that S&P500 breaks 1204 support level. if S&P500 violates 1204 it mean last 2 days move was just a short-squeeze.

These are Supports and Resistance levels:

R1:1228 (MAJOR)
R2: 1232

S2:1204 (MAJOR)