- First Upside Price Level Objective Met
- Flat Sideways Correction Complete
- S&P 500 Index Should Move Up to 1010
In my last post 04/01/2009 I was looking for a multi-month rally with an S&P 500 price level objective of 950 to 1010. We hit 956 on June 11. We finished our first drive up at 930 on May 8 exactly 2 months from the March 6 low. The high in June was the end of leg b in a FLAT abc correction. Leg c of this correction ended July 8 at 870. We should have one more drive higher to the 1010 area and then we may see a significant pull back.This upside objective may be hit as early as August 21-26.
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Posted by Michael Chapman at 2:20 PM UTC
- Multi-Month Rally Ahead
- Technical Support for a Rally
- Fundamental Support…CASH
The S&P 500 cash index just finished a very impressive 14-trading-day run from 667 to 833. This was a 25 percent move; CNBC tells us you would have to go back to 1938 to find a similar event.
Those of you familiar with this report know that I like to list reasons for the market to go up on the left side of the page and reasons for a declining market on the right (hence the “Bull/Bear Review”). Once finished one can stand back to review the weight of the evidence and have a good read on the near term (3 month) direction of the market.
Today that evidence, as seen below, falls decisively in the Bull camp. I am projecting a multi-month rally. My first upside objective is the 950 to 1,010 basis the S&P 500 cash.
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Posted by Michael Chapman at 12:00 PM UTC
- Trading range market
- Economy seems to be muddling through
- Intermediate lows now in for financial stocks
As I said last week, the S&P 500 index is in a trading range from 1,480 on the down side to 1,580 on the upside. We are at the bottom of this range and I look for us to trade out the topside by Thanksgiving.
Early in the week third quarter GDP numbers came in at up 3.9%. This made two quarters in a row at that level and raised concern that the economy was too strong and that we wouldn’t get a rate cut at the Fed meeting on Wednesday.
The Fed did cut its rate 1/4 point but made it clear that the economy seemed to be on solid footing. They were most concerned about inflation. On Thursday an analyst put out a sell recommendation on a prominent bank stock and the markets, fearing that “the other shoe in the credit markets? was about to drop, sold off sharply. The Jobs reports this morning gave a little good news to every one. Larry Kudlows’ sound bite, “The greatest story ever told” is ringing in my ears as I see that we added 166,000 new jobs in October, the street was only expecting 80,000, and at the same time had only a .23% increase in wage growth. The jobs growth number should ease concern about the economy going into the abyss and the Fed should be pleased, given their inflation concerns, that the wage growth rate came in less then expected. Do I hear Goldilocks knocking at the door?
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Posted by Michael Chapman at 2:13 PM UTC
- Correction likely over
- New highs by Thanksgiving?
- Feds likely to cut rates at October meeting
The S&P 500 index has corrected 5.5% from the October 11th high of 1,576 to the double bottom lows made October 22nd and 24th at1490. This is a normal pull back in a rising market. The influence of the down cycle is now past and we are within one week of entering the November through April up seasonal time period. The down move was enough to move Bullish investor adviser sentiment off of its 5-year highs and to push short term technical indicators to sharply oversold levels. Unfortunately, it also took out the stops on the three indexes we track for this letter which means we have moved from an ‘up trending’ market to a ‘trading range market.’ With that said, I believe we are at the bottom of the ‘range’ and can expect the market to trade to the top of the range, possibly to new highs, by Thanksgiving.
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Posted by Michael Chapman at 1:59 PM UTC
