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The Market Continues Its Move Up

sp-bear-mkt-view1

To see a full size of this image or to play with the graphing yourself, just copy/paste the link below into your browser:

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2007-06-01&id=p44098465403&a=175243096&listNum=1

So, we have another up day…Ho Hum 🙂

This is truly the strongest uptrend I’ve ever seen. It is unbelievable. We are just on the cusp, in my opinion, of beginning to draw in all of the people that said – after the crash – that they’d never invest in the market again. Now, they see that they’ve missed a > 50% move in the market and want in to try to recapture some of the money they lost in the crash. Most of them acted irrationally and sold at the wrong time – now the real question is are they being irrational wanting to get back in after this big move.

Generally, I’d say that after a 50% up move following a crash, we are due for a major retracement. However, this chart says we are headed to 1120 on the S&P 500 (a 50% retracement of the entire bear market, not just the post-Lehman Brothers crash).

What are the tells? (1) the Price Volume Indicators show we are in a strong uptrend; (2) the moving averages and their relationship to each other show we are in an uptrend; (3) the cash flow into the market continues; and (4) overhead resistance in the form of buyers remorse is almost negligible (see the volume by price bars along the left side of the chart).

However, near-term, we are in an overbought state and due for some consolidation. Maybe in the 5% range – my best guess is that it will look a lot like the last few consolidations: a few days of grinding sideways after earnings reports end, then a big down day or two, and the buyers will show up to push us up. We could easily hit the 50% retracement level and move through it give lack of overhead selling pressure. This is probably the best chance those on the sidelines will have to get back in.

Earnings have been on the whole very good: tech and cyclical earnings show that economic activity is beginning to pick up. We are soon going to get GDP reports from the emerging markets and I’d expect that they will be very positive and lead to further gains in those markets.

For what its worth there’s something happening here…so enjoy this video of the Buffalo Springfield from the Monterey Pop Fest, 1967

Mark