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Market Marches Toward Next Target

spx-with-fib-2009-07-31

By now, if you are a regular reader of this blog, you are familiar with this chart. I’ve shown it several times in previous posts, explaining initially how we had crossed our first price target for the S&P 500 Index (the 200-day moving average) and then how we were in a trading range for an extended time period between the 200-day moving average and 950 on the index.

We broke through the 950 resistance level and are now working our way higher. Today, with the market trading a bit below 990, we are looking square in the eye a psychological resistance level of 1004. What’s 1004? That is the reading on the index this past election day.

Our next target? 1050

Earnings have been much better than expected this quarter, so the push above 950 has been on a fundamental company-oriented data point. As we leave earnings season, the time for economic-oriented data points (like the better than expected GDP report this morning and upcoming unemployment figures) will take over the direction of the market.

With people declaring that the recession is now over (Newsweek and Businessweek are the most recent), the public will start to buy into this. This means that expectations will be for better than forecast numbers instead of worse than forecast. It will be harder to impress investors into buying, so it will be a tougher go slogging the index through 1004 onto 1050.

Have a great weekend and enjoy the rally!

Mark