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S&P 500 Nears 50% Retracement Level

sp-retracement-view

In my earlier post on oil, I mentioned we had previously looked at the S&P 500 when it was at the 38.2% retracement level on its way to the 50% retracement level. I just thought you might want to see where we are today in this process.

Looking at the chart above, you can see that we are now bumping up against the 50% level.

We’ve been in a pretty strong uptrend. That is easy to see when you look at the chart. But, things don’t go up forever in a straight line – we have moved very close to a 50% retracement of the entire bear market, not just the post-Lehman Brothers crash. If we don’t break through it expect a pullback to the 38.2% pullback level as investors panic then have greed set in. There is too much cash in the system moving into investment assets (instead of production assets) as you can see in the Accum/Distrib indicator at the bottom of the chart for the market to move down and stay down.

We are being very cautious right now in committing new money to the market. We have several GTC buys set at levels where we believe clients can realize 20%+ gains, and we have started to add to a few selected stocks that have not participated yet in the latest up-move.

In the chart below, you can see that we have a strong uptrend in place and continuing to get stronger:

sp-uptrend

You can see that the moving averages continue up and the shorter term ones are moving up faster than the longer term ones. All of the technical indicators are pointing higher. My best assessment is that through earnings season, we should see a strong market, approaching our interim target of 1150 and potentially approaching the pre-Lehman Brothers crash level of 1250.

Relating back to the oil chart, an uptrend is a powerful thing, particularly with the Fed’s monetary policy on your side. If we break through the 38.2% retracement level then the next target is the 50% level – much like you see on the first chart above.

Mark