Tuesday, December 16, 2008

Bear market grinds on

Hi there, and welcome back to RI's S&P 500 blog.





Now well over a year old, this bear market has erased almost half the value of the S&P 500 Stock index. What seemed like a simple sell signal (when the 13 EMA crossed below the 30 SMA in November of 2007) now looks like a significant pivot point in contemporary economic history.

This week, like so many of the recent past, is clouded with poor economic data and the potential for more US corporate bankrupcies. Couple this with significant job losses and its no surprise the christmas of 2008 won't be too jolly (especially on Wall Street!). Ironically enough, this is the sentiment one needs to see in order to 'put a bottom in' the stock market. The bad news is now priced into stocks and as prices suggest things are indeed bad. However, as a leading indicator, it shall be the first thing to turn up when the economy is precieved to have hit bottom. We of course shall be well aware of that potential turn as the charts often give an indication of such a turn well in advance. Using the 13EMA/30SMA cross over system is one such example.

In the short term, for the past five weeks the market has been contained within a trading range where 74.34 represents the bottom and 92.38 represents the top. Considering today is the US Fed. Reserve Meeting for December and this Friday is the December Options expiry, I wouldn't put alot of confidence in the market being where it is today come Monday or Tuesday of next week. Regardless, should the market close above or below either of these range points, the appropriate short term action should be taken.

Technically speaking, there is no bottom in the market yet. The market is now well contained within two bearish price chanels. This suggests that prices need to fall further and that any rallies should be viewed with skepticism until these chanels are broken. There is a valid bearish flag pole working which suggests prices need to hit 54.48. And until either of these events happen, one ought to sit on the sidelines and watch the economic fireworks from a comfortable cash position.



That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Tuesday, December 2, 2008

Consolidating a new lower trading range

Hi there, and welcome back to RI's S&P 500 blog.



What more can be said that hasn't already. Short term traders are short from 83.58 with stops above recent highs at or just above 90.13. Those short should be looking for the ultimate selloff down to the bear flag target at or near 54.48.

Medium to long term investors have no business even looking at the stock market right now. Yes a seasonal bottom should be coming in but my fear is that will not be realized until well into the new year.

My short term expectations are for a test of the recent lows as we head into the December options expiry (Dec 19th) after that we ought to see a typical 'santa claus' rally into the X-mass/New Year's holiday period. Because New years falls on a Wed. this year. I wouldn't expect the selling to begin in earnest again until the second week of January.


That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Thursday, November 27, 2008

And the bear goes on

Hi there, and welcome back to RI's S&P 500 blog.



The recent breakdown of the S&P 500 stock index through its October lows suggests there is further price declines ahead.
For traders, an outright sell signal was registered two weeks ago when the market moved below the important low of $83.58. One should be short from this level with corresponding stops just above the recent high (the day of the US Presidential election) at or near $100.86. As the chart above illustrates, we sold off tramatically into the November Options expiry last Thursday November 21st. And while that represented a nice profit on the short trade, we have neither hit the bottom of the current trend channel nor have we hit the bear flag target. This suggests that once the market has found buyers again we ought to see a serious test of that low (at best) and a punch through those lows (at worst).
For investors, there is no sign of a bottom anywhere in sight so one ought to sit on the sidelines and watch for the time being (once again!).
Considering the substantial bearish sentiment and where we are in the seasonal cycle, some sort of bottom should come in over the coming weeks/months. As a side note, the bear market of 1973-1974 saw the Dow finish the year at or near its lows in 1974 (only to reverse violently in early January 1975) so a similar performance shouldn't be too surprising. We are at about the same point in the 'fear' cycle (roughtly the 8th year of an expected 17 year cycle) as 1974 and the prospects of some sort of recovery now seem to hinge on the new Democratic President, Obama, and what his 'change' platform will produce. George Bush is a lame duck and shall ride out his remaining month and a half in office as nothing more than a spectator.
That's all for this week,
Brian Beamish FCSI

Wednesday, November 19, 2008

The test came and failed again

Hi there, and welcome back to RI's S&P 500 blog.







For a few weeks now we have been watching the market trade in a well established channel between a high just under $100.00 and a low near $83.58. The market popped up above the high end of the range just before the US Presidential election and then ( just as one was starting to feel a little bit more optimistic about things) the market broke straight down to take out the important low at $83.58 just last week.


For the Bulls, the fact that the lows were taken out means we must start the construction of a new bottom all over again. So going forward, we shall use the lows of last week as our new bottom of the trading range $82.09. We ought to see a nice rally away from the lows then a test of this low and then a turn back up above the rally peak before we can get a buy signal. All this says to me is that we probably won't get a seasonal bounce in the market until well into December. Novemeber options expiry is coming up this Friday 21st and the market ought to remain skiddish into that.


For those agressive bears, the break of $83.58 represents a new intermediate sell signal, with your associated stops just above the pre-election peak of $100.86. This is indeed a monsterous bear flag pole formation which suggests prices need to come down to the $54.50 area! [(129.96-83.58)-100.86]. Ouch!



In summary then, new weekly sell signal suggests recent potential bottom has gone away. Bulls should remain on the sidelines while bears can play (what I consider to be high risk) the short trade with an equally aggressive short target of $54.50.



That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Tuesday, November 11, 2008

We knew a test of the lows was coming, can those lows hold?

Hi there, and welcome back to RI's S&P 500 blog.




This week begins with talk of the G-20 meeting in Brazil and the associated statement that the group "is prepared to act urgently to bolster growth.". As well, we heard of China's intention to spend more than 500 billion dollars through an economic stimulus package. Interestingly, the market has yawned at the news so far - resuming its expected test of the lows that were registered 5 weeks ago.


This is the talk we need to start hearing in order for us to believe a bottom is in - from a fundamental perspective (governments will spend money, companies will get contracts, earnings will start to rise, etc.). Coupled with this talk of government spending, the banking crisis seems to be cooling down as both Eurodollar & Libor contracts have registered bottoms in price (with nicely defined upside targets) putting the trend in corporate rates back in line with Fed-fund futures.


From trading for more than 20 years I want to stress to the public that this is a dangerous part of the bottoming process. Why you ask? because one has the tendancy to assume a bottom is in. There is no bottom as of yet and we must remain on the bearish camp until such an event happens. While what we are hearing sounds good, the process may take quarters to start showing up on balance sheets.


Yes, a bottom might come in the next few days but it also may not come for months. So continue to be patient, watch the stated marks on the SPY (top:100.86/bottom:83.58) for a breakout and be patient. If either mark is broken, trade appropriately.


That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Thursday, November 6, 2008

Here comes the big test

Hi there, and welcome back to RI's S&P 500 blog.




The long awaited event has come and gone. President elect Obama has now to wait two months before he can start his agenda. In the meantime, there appears to be a continuation of the leadership void in the US. As well, the economy continues to spit out data with a recessionary tone. Both suggest we shall not get any upward push in prices for the time being. There was talk of a new stimulus package coming from the new congress, but until that happens prices may move lower. My hunch is we have seen the lows of this cycle BUT we may see the lows tested in earnest. We ain't out of the woods just yet my friends.

Currently the market is in a trading range btween $101 on top and $84 at the bottom. A close above or below this range would suggest a short term trading opportunity. The market is still bearish because the 13EMA is still below the 30SMA. And (as suggested previously) any rallies should be considered trades only and may be met with stiff selling resistance at or near the $110 level on the SPY. I can't imagin the $84 level will be broken but if it is one ought to look for a move into the $58 range (lets hope this insn't the case). Regardless, trade appropriately.

That's all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Thursday, October 30, 2008

The bottoming process continues

Hi there, and welcome back to RI's S&P 500 blog.



Calmer heads seem to be prevailing on Wall Street as the sheer panic atmosphere is now be replaced with realization that governments around the world are getting a grip on the banking crisis and that the ridiculous overspending by the US consumer may have finally come to an end.

There is no doubt that the recent technical damage done is significant. Ironically enough, markets are often most volatile tops and bottoms and I do believe the recent volatility, coupled with the negative sentiment and seasonal issues suggests we are in that bottoming process.

As the chart above illustrates, we have now established a trading range (83.58 to 99.10) to work with. Should the market move through either of these points we shall be given a new signal to work with. One should trade accordingly.

My hunch is we shall break higher once the US election is out of the way in early November. The market has been tentatively promised a stimulus package by the new congress and at that point there should be some clarity of leadership with the US executive office as well.

Should the seasonal bottom come in as expected one may find significant resistance at the bottom of the old trend channel. As pointed out in last weeks offering, there are three significant technical barriers at or near $110 on the SPY.

That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Thursday, October 23, 2008

No conclusion to down move yet

Hi there, and welcome back to RI's S&P 500 blog.



The long process of waiting for a bottom to form in the stock market has begun. The days of limitless spending and ridiculous notions of second and third homes, Cadillac escalates and showing your 'bling' have passed and the days of belt tightening, rationing and evictions are now here.

Regardless of the long term implications for our society, we must now take the time to clean up the mess George Bush's policies have created. From a traders perspective, we may be in a long holding period with regard to US equities as doubt has been cast on the 'American' model of capitalism. Ironically, it will only be after a large majority of our population swears never to buy another stock again, can we realistically begin to believe some sort of 'bottom' is in.

As for what is happening today, stock prices are still under quite a bit of pressure. As the today's chart illustrates, there are three significant technical barriers to rallies going forward (The gap at 109.68, the 13 EMA at 111 and the bottom of the trend channel at or near 115). These hurdles will need to be cleared before any rally can resume in earnest. My hunch is that they will pose too much of a challenge for the time being.

For the mean time, we remain flat with regard to positions. After being short and having our down side targets hit, one ought to sit on the sidelines with a nice pile of 'dry powder' and continue to wait for some sort of bullish tone to re-emerge. Yes we should get some sort of seasonal bounce into the spring, but that is the spring and we are just now heading into the winter.

That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Tuesday, October 14, 2008

Did they just throw the baby out with the bathwater?

Hi there, and welcome back to RI's S&P 500 blog.



Can you say 'Kaboom!'

Here at The Rational Investor we have been bearish for quite some time. In fact, I had been looking for a climactic selloff to signal a potential bottom - and boy did we get it! Our most recent downside target had been $107 on the SPY and on 10/06 that target was hit. At that time it was recommended to take profits on the short trade (Please refer to our message board on Silicon Investor for recommendations and notifications from RI. You can find it here: http://siliconinvestor.advfn.com/subject.aspx?subjectid=57519 ).

For the time being (and probably for a few weeks to come) we shall be sitting on the sidelines watching for a new consolidation. Monday's price action was indicative of the proverbial 'dead-cat-bounce'. Yes it was dramatic and yes it was on some fundamental news but in all honesty - one day a new bull market does not make. Rational Investors will be looking for confirmation of the bottom. We ideally want to see a solid test of the lows from last week and then a subsiquent rally through whatever highs we are registering now (ie. the price action should look like a W). As well, it should be noted that there remains a gap to be filled at the closing low from Friday (at or near $88.50).

The market has paniced and shorts were very profitable. Seasonally we should be looking for a bottom. Looking does not mean we have found one though. For now we sit and wait - period.

That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Thursday, October 2, 2008

The fear is almost palatable

Hi there, and welcome back to RI's S&P 500 blog.



Once again we sit on the edge of our collective seats wondering if the US government will come to the rescue of the markets. The last attempt ended poorly and it looks like investors aren't taking the chance this time around and selling beforehand. What is most interesting (and quite often the case) is that investors are selling into support. For a few weeks our target has been $108 on the SPY and there is no reason why that won't be hit. As the chart above illustrates, there are a number of technical reasons why one ought to look to take profits from short trades and to look for a rally ahead rather then a further declines. One might even consider the current market psychology as one of "selling on the rumor and then buying on the news". Look out for a considerable technical bounce to the upside should the market get a clear signal from Washington that the worst of the problems are now behind us. While this will be in no way a medium term buy point, it may represent a nice seasonal long trade into the end of the year.

As I have indicated before, the bearish sentiment is getting rather high. The Vix index was recently above 50 (indicating significant fear in the marketplace), bearish news is dominating the general media and the majority of world equity markets are moving lower in unison. From a contrarian perspective, Smart money is buying (Buffett's recent purchase of GS as an example). And lastly, on a US PBS News service it was suggested that this was not the same as other market corrections, that indeed this time 'it was different'.

These are all classic signs of a market bottoming process. It is the market's goal to take the stock out of the investing publics 'weak' hands and to put it back into the 'strong' hands. It is painful, often dramatic, but very predictable.

It is during these times we can be thankful there are ways to figure out where the 'strong' hands (often referred to as Insiders) are buying. For more information on this please visit the website and take the mini-seminar on technical analysis and model based trading.

On a final note, it is important to keep in mind that the bailout of the US housing sector during the Great Depression was a very profitable venture for the government in the long run. Most people paid off their mortgages over time. So too now, most of the 'bad paper' will eventually be repaid and once calmer heads prevail, there will even be a secondary market for these loans. Not today, maybe not even a year or two from now, but one day it will be so.


That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Wednesday, September 24, 2008

Ready for a big finish?

Hi there, and welcome back to RI's S&P 500 blog.



In what looks to be a classic parabolic move (inverted in this case) world equity markets are all pretty much moving in unison to the downside. (usually when all the equity markets move in the same direction at the same time it is a good indication we are nearing a proverbial bottom). Another great contrarian sign, Warren Buffet announced (through Birshire Hathaway) he would make a $5 billion dollar investment in Goldman Saches. Ever the horse trader, Buffet recieved an additional $400 million dollars worth of warrants at on GS $115. In my seminars and presentations I often make reference to Buffets classic market axium: Sell when others are buying and to buy only when others are selling. Indeed this appears to be the case once again. Hats off to the oracle of Ohmaha. Now all we need if for one of the major US newspapers or periodicals to come out with a cover story on the stock markets' poor performance and we will know the bottom is in!

Ok, now for the chart. From a technical perspective, we were given yet another sell signal on the SPY when it moved through the important low of $120 just two weeks ago. The bear flag pole formation confirmed with this move suggests prices want to move down to the $108 level. My hunch is we move down in some great climactic spike. This is the month to do it too! October often hands the market some stunning one or two day losses. The bottom of the downward pointing channel (that has dominated this bear move) currently sits near $115 and ought to be supportive in the short term. But if broken, look for another gut wrenching drop.

With regard to purchases of US shares; Until the dust settles from the staggering $700 billion dollar bailout package in front of the US Congress, I can't see any 'buy' signal coming in.

Keep those seat belts fastened, we ain't done yet


That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Wednesday, September 17, 2008

A big test, and another big failure

Hi there, and welcome back to RI's S&P 500 blog.



The anticipated test of the $120 level happened this week. Unfortunately, that test failed and the market has moved to new relative lows. The bear market shall go on for at least a little while longer. As the chart above indicates, we are comfortably within a massive weekly downward pointing channel that began almost one year ago. One encouraging development, we have hit the bottom channel line with today's sell off. Should we close below that important line we could be setting up for an even more extreme correction. Further bank failures, political ineptness or even international brinkmanship may precipitate such a scenario. Should that scenario play out, one ought to expect the market to move down into the$108 area. [bear flag target calculation: ($143.58 - $120.02) - $131.51].

Lets keep our proverbial fingers crosses, aren't we all a little tired of falling prices....

That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Wednesday, September 10, 2008

Getting close to another big test

Hi there, and welcome back to RI's S&P 500 blog.




Since the market's short term failure two trading weeks ago, our downside target has been a serious test of the July 14th lows at or near $120.02. Considering the significant trend line that exists just below this mark it shouldn't be a surprise to see the market shoot past the 120 level and bounce off the trend line (blue line above). Short term traders ought to consider covering short positions should we trade down to this level.

Regardless, over the medium term, the market continues to forge lower lows and lower highs suggesting we are still very comfortably contained within a bear market. That posture will change with a close above $132 on a weekly basis and a cross of the 13 EMA and the 30 SMA. That is asking quite a bit for this market, but hay even a market technician can dream!

Speaking of moving averages; for those looking to add a timing tool to their investing tool kit, try adding the 13 EMA and 30 SMA as shown above. Notice how they crossed way back in November of 2007. If you followed this one tool, you would have been avoided much of the past year's misery in the stock market. While no technical tool works all of the time, this one tool helps in making sure you are not caught on the wrong side of the market. Try it out and I am sure you will be pleased with its results.


That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Thursday, September 4, 2008

Uptrend failed, look for test of summer lows

Hi there, and welcome back to RI's S&P 500 blog.



As European growth expectations come into questions, the broader US stock market (as measured by the S&P 500 depository receipts - SPY) also suggests poor economic times ahead. If you believe the stock market is the ultimate leading indicator of an economy then the performance of the SPY suggests the US has been comfortably within a recession for the six months. Japan is showing negative quarterly growth, Europe seems to be tipping over, and the US is already in a bear market. Looks like tough times ahead for equity investors.

From a stricly short term perspective, markets love to put in lows in the late 3rd quarter. September & October too are generally the worst performing months for equities. Couple the expected seasonal performance with poor economic expectations and add in a little international tension (thanks Russia!) and we have the makings for further price declines for the forseable future.

Technically speaking, one ought to expect a test of the summer lows at or near $120 on the SPY over the coming weeks. Should that level be broken then we must revise our downside targets accordingly.

That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Tuesday, August 26, 2008

Short term uptrend under attack

Hi there, and welcome back to RI's S&P 500 blog.



As Labor Day approaches, the summer doldrums are almost over for another year. Junior stocks are usually hit the hardest during this seasonally weak time of year - and this year has been no exception. With regard to the broader market, as the diagram above suggests, we are still very well contained within a massive downward pointing channel that has been in place for the past nine months. Using the moving averages above, we can clearly see the SPY entered its bear phase last November (when the 13 week EMA crossed below the 30 week SMA). For simplicity, we will not get an outright 'buy' signal until the 13 week EMA crosses back above the 30 week SMA. As well, normal consolidations take 18 months to play out so I am not expecting too much out of the US stock market (and most world equity markets for that matter) for the next six months at the least.

Currently we are consolidating a 'dead-cat-bounce'. From the extreme lows seen in July, we have rallied back to the 50% level ($131.80) and have not done much since. Should the short term upward pointing channel (small blue lines) be broken, one ought to expect a test of the lows seen in July (A.). Should we consolidate and break higher, resistance should come in at the major downtrend line (B.).

That's all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Tuesday, August 19, 2008

A key point in the recent rally

Hi there, and welcome back to RI's S&P 500 blog.



This is an important point in the life of the recent rally seen in the stock market. As the chart above details, we have made the 'technical' bounce off the extreme low seen in July (that was the easy part). For this bottom to be real, we will now have to see if the recent lows can hold during a serious retest. At best we may establish a nice consolidation for the next few weeks in an around these levels. My hunch though (considering the rhetoric coming out of Moscow and the poor economic data from across the world) is we will retest the lows seen in July. On a final note, one ought to respect the fact that we are still very comfortably within a long term downward pointing channel. Where resistance to that trend is represented by the blue arrow in the chart above and support is represented by the red arrow.
Better get out that old Beta copy of Wolverines.......The Russians are coming, the Russians are coming!
That's all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Tuesday, August 12, 2008

Daily bottom comes in at bottom of weekly channel

Hi there, and welcome back to RI's S&P 500 blog.



The long awaited Beijing Olympics have begun. The trends we have talked about over the past four to six years in many commodities look to be changing as the 'build-out' of the Chinese economy has hit its zenith. The Chinesse consider 08/08/2008 to be a very signficant date and I am starting to believe it too! Could this be the pivot point for the commodity markets? From a short term perspective, not less than 13 new commodity trends establish themselves this past week (please refer to WCTS posted at http://www.the-rational-investor.ocm/WCTS080808.pdf).

One result, the S&P 500 index looks to have bottomed amid the commodity market meltdown. On cautionary note - commodity prices themselves are very volatile. After these markets settle down, one ought to expect some sort of test of the old highs. As well, most bottoms require a retest of the initial low. Looking at the chart above one can see how the SPY rallied sharply from its recent lows at $120. When the commodities retest their recent highs I will be expecting a test of the $120.02 area again on the SPY - but hey lets enjoy the rally while it lasts.
We have hit the short term 50% level and are flirting with the fast moving average at $130, should we consolidate and then break higher, one ought to expect a test of the medium term bear market trend channel at or near $140.00....

Enjoy the bounce while it lasts. That's all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Tuesday, August 5, 2008

Establishing A Trading Range

Hi there, and welcome back to RI's S&P 500 blog.



The well established bearish channel that began at the end of 2007 continues. Currently we sit very close to the bottom of that channel and the bearish sentiment in the street is quite high. Should either $129.15 or $120.02 be broken one should act accordingly. From a strictly technical/Short term oriented basis, the 200 day on the SPY is currently just above $136 suggesting there could be an 8% rally just to get us back to resistance. Consider too our US Presidential election year thesis (read Opportunity Is Now Here, a special report by The Rational Investor), one ought to see at least a consolidation in prices if not an outright rally over the coming weeks and months. One often is greeted with a sense of euphoria come inauguration day (early January 2009) and by that time one ought to look for a higher market. Ironically, that will probably be the time we will be looking for a top. So to take profits when others are euphoric one must have the guts to be buyers when others a pessimistic. As suggested, the market is quite pessimistic right now. We DO NOT have a buy signal yet! But one must be prepared for such an event. Be patient and vigilant.

That is all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Tuesday, July 29, 2008

Bearish wheels keep on spinning

Hi there, and welcome back to RI's S&P 500 blog.



The bearish sentiment on the street is almost getting palatable. Government bailouts of Fannie Mae & Freddie Mac coupled with talk of GM going out of business are the classic ingredients for a bear market. They are not the ingredients for a good short trade though. Those that had the gumption to sell (or even to go short) in May and walk away are the smart ones, those that sell (or even go short) now are just asking for trouble. As previously stated, the longer term picture is indeed bearish (lower highs and lower lows is the definition of a bear market) but the market is very oversold in the short term. A trade back above $130 would flash a daily buy signal (notice the double bottom forming over the past four weeks). That has not happened yet but should it, there may be quite a rally based more on short covering rather than any new fundamental buying opportunity. Shorts BE CAREFUL!

That is all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Wednesday, July 23, 2008

The Summer Doldrums.....starting to form a bottom?

Hi there, and welcome back to RI's S&P 500 blog.



Stuck in a massive downward pointing chanel, the US stock market (as measured through the SPY - The Standard & Poor's 500 Index's ETF) continues to grind through the summer. From the period of mid May through mid July, the SPY has lost roughly 20 points or about 15%. It puts the saying "sell in May and walk away" into perspective, doesn't it?

Regardles of the past we must be ever watchful for signs of what may come in the near future. Is there a significant bottom in the US stock market? No, we are no longer in a bull market and must therefore look at rallies as counter-trend at best. Is there a potential for a trade-able rally back into resistance (maybe near the May highs around $142.5)? Yes, counter trend rallies often take the market right back to test the previous pivot point and we are now starting to head into a seasonally good time of year for the stock market. For the next three months the market may have the wind at its back.

Lastly, this week I ought to bring back to mind the idea that energy prices are topping out. While just weeks ago the idea that energy prices were going to go down seemed outlandish, that notion is gaining ground in the marketplace. An earnest drop in energy prices is all the market needs to justify that counter trend rally I'm looking for. Read my special report (Opportunities In Options - Is it time to start building a short position in energy?) at http://www.the-rational-investor.com

that's all for this week,

Brian Beamish FCSI

the-rational-investor.com
the_rational_investor@yahoo.com

Tuesday, July 15, 2008

Lower highs & lower lows equals a bear market

Hi there, and welcome back to RI's S&P 500 blog.



The definition of a bear market is one where prices continually make lower highs and lower lows. Since the fall of 2007 we have seen exactly that from the S&P 500 index (represented above through the S&P depository receipts - SPY). The lows from winter 2008 were recently violated confirming this bearish trend and further suggesting this bear has more damage to do. For the near term one ought to be cautious and patient. Traders should take comfort in the fact that we are getting closer to the ultimate target of this down move ($118 area). Based on the bearish flag pole formation (discussed last week) and the wide downward pointing channel (seen above) significant support should be seen just below $120 on the SPY or 1200 on the index itself.

While there is no medium to long term buy signal anywhere in sight (and probably won't be for quite some time) I remain confident the market will find a tradable bottom in the coming weeks in preparation for the coming US election in the fall. Again - hurry up and do nothing for now

Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Tuesday, July 8, 2008

A Big Test Failed

Hi there,and welcome back to RI's S&P 500 blog.



We here at The Rational Investor have been looking for a test of the winter lows some time here in June and we have now indeed got it. Unfortunatly, the market did not pass the test and has now confirmed a rather bearish looking chart pattern on the SPY.
In a classic Bear Flag formation, the market fell from $150 (A.) to $125 (B.) very quickly. It then consolidated back to $143 (C.). If the market breaks point B. (the low of $125) then one must look for a continuation of the first move - in this case down to point D. (at or near $118). As well, the break of the winter lows at $125 confirms the rather wide downward pointing trend channel (red and blue lines) which also happens to suggest there is support at or near the $118 level.
The SPY (and by default the broader US economy) is suggesting the weakness seen over the past months will continue for some time into the future. the US economy is in contraction - earnings are in contraction and costs just keep going up. Indeed, financial stocks have yet to bottom in earnest and energy prices have yet to top.
At best the market shall remain range bound between $118 to the downside and $143 to the upside for some time to come. At worst, we continue to trade to new lows building more and more resistance into the price charts.
Yes the market is very oversold in the short term (and a dead-cat bounce could take us right back up into the $140 area on the SPY). If that is to happen we need a reversal sometime within this week or early next week. More importantly though, the longer term implications of this significant technical failure suggest we are now firmly within a period of price consolidation rather than expansion.
Not the best report to make but hey, I gotta call 'em as I see 'em....
Brian Beamish FCSI

Tuesday, July 1, 2008

Time for a big test

Hi there,and welcome back to RI's S&P 500 blog.


Those that did sell in May and walked away are feeling pretty good about themselves these days. The broader stock market continues to deal with rising energy prices and a poor relative earnings picture because of the housing debacle. While readers should be very comfortable with the idea that I believe energy is near a top, picking the exact top is never easy. As a result, violent price swings and calls for huge upside price targets should be expected. Keep in mind our basic rational investment policy - we wish to be sellin' when they are yellin and only buyin when they are cryin'. These days they are definetly yellin' in energy and simultaniously they are cryin' in the stock market.....enough said

Seasonally we should be looking for a bottom near the end of June. I believe this bottom is near and the chart above demonstraites that regardless of the prevailing market pesimism, we are just now getting back to an area of significant technical support. One should look for support in and around the $127 area on the SPY. Be very careful about initiating new short positions as we are oversold and could bounce very easily. While this won't represent a 'Buy' signal (as we need to see a double bottom in price before we can get outright bullish) short term traders may see a window of opportunity once the shorts are on the run.

That's all for this week and thanks again for your interest,

Brian Beamish FCSI
the_rational_investor@yahoo.com
http://the-rational-investor.com

Tuesday, June 24, 2008

Are we done correcting? Not yet I'm afraid

Hi there,
and welcome back to RI's S&P 500 blog.

The late spring correction continues as expected. The SPY itself is now down 8.5% from its highs seen just last May 19th at $143.58. As in my previous posts, I fully expect the lows of March 17th, 2008 at $124.82 to be tested in earnest. What is most interesting is how and when this is occurring. Readers of my special report, Opportunity is Now Here, will remember that during typical US Presidential election years, the market does nothing for the first half, then dramatically outperforms for the second. Oil is (in my opinion) topping out, earnings are (in my opinion) starting to bottom out and the political stage is being set for a real showdown in November. Both Obama & McCain shall do anything they can to appeal to voters with regard to energy prices - that can't be oil friendly. Both candidates shall claim to have the appropriate fix for the housing crisis - that should help the financial sector. Even if the rhetoric is perceived as only a short term fix one can see why the market may do better going forward.

Currently the market is trending lower and one ought to remain cautious. As a rational investor though, I do believe we are NEAR an exceptional buying opportunity. Keep waiting patiently.
That's all for this week, enjoy,
Brian Beamish FCSI

Tuesday, June 17, 2008

And the grind goes on

Hi there,
and welcome back to RI's S&P 500 blog.



The old adage of Sell in May and walk away has so far been correct once again. As per my recent blog entries, one ought to expect a test of the $130 area on the SPY over the course of the next few weeks. That test in now underway. Worries over the financial sector and the associated housing crissis will prevent any further upside action for the time being. As well, the parabolic nature of the energy markets will act as both a dampener on economic activity and a stimulant for inflation. See RI's recent report, Opportunities in Options - Is it now time to start building a short position in Energy, for a further look into the potential profits in shorting oil (through the use of long term Put Options).
That's all for this week, enjoy,
Brian Beamish FCSI

Wednesday, June 4, 2008

Looking for a late spring bottom

Hi there,
and welcome back to RI's S&P 500 blog.



The long slow process of correcting is apon us. As I have stated in previous posts, the old adage "Sell in May and walk away" suggests we ought to see some sort of pull back in the major stock indicies over the coming weeks. We are in the midst of that pull back with the SPY off 3% from the highs seen just three weeks ago. I am still looking for a serios test of the 1 year up trend line (at or near $132.50 on the SPY itself). Rocketing higher oil prices, more troubles from the financial sector and now a united Democratic party (behind B. Obama) shall stress the markets for the coming weeks.
Enjoy the show and don't be in a big hurry to buy anything for the time being.
Brian Beamish FCSI

Tuesday, May 27, 2008

Don't get caught up in the frenzy

Hi there,
and welcome back to Stock Charts R US blog.



After a healthy rally back into resistance the SPY has put in a weekly Key Reversal (where the market opens higher than the previous week but then closes lower than the two previous weeks' lows). A bearish signal in itself (refer to technician's minimanual for help with Bearish Key Reversals) this price pattern suggests a downside target of $130.70 [($144.30-$137.50)-$137.50] should the $137.50 level be broken. That corresponds roughly with the convergance of the two year uptrend line and the six month downtrend line (marked with a big circle). Considering the robust energy sector and the lackluster financial sector, a correction back into the $130 area on the SPY shouldn't be too big of a surprise going forward.
Brian Beamish FCSI
The Rational Investor

Tuesday, May 20, 2008

Sell in May and do something....

Hi there,
and welcome back to Stock Charts R US blog.


As the old adage goes, Sell in May and walk away...
Oil is pushing higher by the day and the stock market (and the economy too) is starting to feel the pinch. Couple this with an already weak financial sector and we have the makings for yet another seasonal top in the merry month of May. Hold off on any big purchases for the next little while and look for a test of the 130 area into June-July.
With regard to energy prices - exactly how high can crude oil can go is anyones guess. Parablic moves in commodities are quite common. They occur near the end of moves and can be quite violent. Crude supplies themselves are not dramatically changed and the seasonal trade in Unleaded Gas has come and gone. The only other market moving event on the horizon is the 60th birthday of Isreal and it would seem energy prices are being pushed higher because of this 'fear' event rather than on any solid fundamental news. 200 day moving average on July Crude is near $90/barrel - Oil Bulls beware!
They don't say 'Sell in May and walk away' for nothing.
Brian Beamish FMA FCSI

Tuesday, May 13, 2008

Maybe a little back filling is in order

Hi there,
and welcome back to Stock Charts R US blog.


The S&P depository receipts (SPY) is our proxy on the US stock market and really the broader US economy too. The recent 'double bottom' is significant because it suggests there is demand for US stocks as market participants believe there is some 'light at the end of the tunnel' with regard to the recent housing crisis. The 12 percent rally seen since the March lows (almost a text book 50% retracement of the down move!) is one part of the bottoming process. After the 'dead cat bounce' one ought to expect some sort of test of the double bottom itself. If the economy is turning the lows of the winter will hold. Watch for a test of the 130 area into June-July.

They don't say 'Sell in May and walk away' for nothing.

Brian Beamish FMA FCSI

Tuesday, May 6, 2008

Time to start climbing the 'wall of worry'

Hi there,
and welcome back to Stock Charts R US blog.

The double bottom we have been waiting for has finally come in. Over the course of the past four months the market has sold off, rallied away, tested the sell-off low and then turned around and closed higher than the rally peak. This is a classic technical 'double bottom' and suggests there is good buying support for stocks at or near these levels. As well, the market has broken the down-trend (red dashed line) that represented the bear run since the fall of last year. We are still very early in the bottoming process though as the moving averages are still pointing lower and the market is getting overbought from a daily & intraday basis. However, the general message should be clear, Instead of looking for further downside targets (as the market made lower highs and lower lows) we now can start pondering upside targets.

If one draws a channel from the bottom of '06 to the recent bottom and then project that same angled line off the top (market peak in late '07) we see a nice upward sloping trend. For further confirmation of this trend we would like to see a serious test of the lower trend line soon. Considering market seasonality (Sell in May and walk away) and what a typical US Presidential election year looks like (market bottoms near end of Nomination process), one shouldn't be surprised to see that test come in over the next month or two. Ideally, the peak in selling would occur at or near where the red dashed down-trend-line and the blue solid up-trend line meet.

Should this massive channel hold, one might consider a test of the '07 highs as one target and then ultimately a test of the upper channel line as another somewhere down the road. For the short term however one ought to be looking for a pullback into the 'summer doldrums'.

Brian Beamish FMA, FCSI

Tuesday, April 29, 2008

Do we have the makings of a bottom?

Hi there,
and welcome back to Stock Charts R US blog.


After some time we finally have the makings of a technical bottom. As the diagram shows above, one of the more often occurring price patterns (that may signal an end to the previous trend) is what is known as the 'double bottom'. This is where higher highs and higher lows are put in. In essence, the reverse of what had previously been happening (ie lower highs and lower lows). The public is enamored with the Bearish chatter and this is roughly about the time a bottom comes in a typical US Presidential election cycle. Refer to chart-of-the-day, Dec, 2007 study: http://www.chartoftheday.com/20071228.htm?T

One note of caution, today is the start of a 2 day meeting of the FOMC, we will have to see the market close above 138.83 (high of Jan, 2008) this Friday to confirm this price formation.....
Keep our proverbial fingers crossed,

Brian Beamish FMA FCSI

Tuesday, April 15, 2008

The chanel goes on and on

Hi there,
and welcome back to Stock Charts R US blog.


The bear market churns away as financial stocks continue to feel the pain of poor earnings reports. GE's report of a larger than expected loss late last week brought the recent four week market rally to a halt just as it was approaching the upper end of its current trading range. The market shall be contained within the current trading range until either the $140 or $125 levels are broken. Given the financial sector's poor earnings reports released of late a bullish breakout isn't likely soon. Regardless, it is out of bear markets that new bulls are born. So with this in mind (and the coincidental indicator of what to expect during a typical US Presidential election year) look for a better second half to the year....BUT NO BUY YET!
Brian Beamish FMA FCSI

Tuesday, April 1, 2008

Hurry up and go no where

Hi there,
and welcome back to the Stock Charts R US Blog.

The bearish chart pattern registered in October through December of 2007 is still comfortably in place. While the market may have found short term support at or near the 4 year business cycle moving average (currently near $127) there is yet to be any sort of bullish chart pattern registered. In fact, the recent trading range between $125 and $140 may be setting up for a push towards $113 should the recent lows fail to hold [($152 {Dec peak} - $125 {Jan low}) - $140 {Feb peak}]. Only time will tell, but my bet is not to expect too much for the next few months as a typical US Presidential election year sees a poor first half followed by a better second half of the year......

In other words, hurry up and do nothing,
Until next blog,
Brian Beamish FMA FCSI :)

Tuesday, March 18, 2008

The market found someone to say 'uncle'

Hi there,
welcome back to the Stockchartsrus Blog.


On a day where the US Federal Reserve Board cut its short term interest rate by 75 basis points the S&P 500 rallied more than 4 percent. As the chart above suggests, the lows of January have been tested and the 4 year business cycle moving average has held. While it will take a close back above $140 on the SPY's to register a weekly buy signal, the market has registered daily buys suggesting a seasonal bounce. The fallout from both a collapsing US housing market and the subsiquent mortgage backed securities debacle has claimed its first (and the market hopes) the last victim, The Bear Stearns Company. The stock topped out during the housing mania a couple years ago above $150/share. Over the weekend it was announced there would be a mercy takeover of the company by JP Morgan at $2/share! Isn't capitalism wonderful....

In short, no reason to get bullish yet but maybe the worst is behind us...
Until next blog,
Brian

Tuesday, March 11, 2008

The Market Woes Continue

Hi there,
welcome back to the Stockchartsrus Blog.



Today we will look once again at the S&P 500 depository receipts (SPY). The potential bottom we talked about last blog has yet to be confirmed. Additionally, a move below the low of $126 (from 01/22/08) will signal yet another sell signal and suggest prices may need to move toward the $120 area. The Cliche, 'Its always darkest before the dawn' seems appropriate. Keep in mind, the US market (as measured by this broad basket of stocks) is now down more than 12% YTD so traders will be looking for any type of rally to save their February. As well, the market is flirting with the 4 year average price at or near $126. In other words, the market isn't over-valued any more.

In a sentence: While there is no buy, the market is cleaning itself up.

Until next blog,
Brian Beamish FMA FCSI

Tuesday, February 26, 2008

Hello and Welcome to the StockChartsRUs Blog

Hello and welcome to the Blog spot for StockChartsRUs.

We will begin this blog with a quick overview of the broader market through the S&P 500 depository receipts (SPY). This is a great vehicle for analyzing the stock market as it represents and index of the 500 biggest issues in the US market.

Here is the Weekly Chart for the SPY:



Three things jump out at me when I look at this chart
1. The broader market flashed a 'sell' signal in early Nov. '07 when the 13 period exponential moving average (which is an excellent gauge for the short term trend of the market) crossed below the 30 period simple moving average (which is an excellent gauge for the medium term trend of the market).
2. The market has moved back into support near the 200 week simple moving average (also known as the 4 year business cycle moving average).
3. the market is now trading in the lower trading range of its current up trend channel.

Conclusions:
The market is still 'consolidating' its recent breakdown and therefore still contained in its current downtrend. That trend will change once a 'double bottom' is registered (in this case a close above $140 will confirm).
From a longer term perspective, the euphoria of the market has been cleaned out and we MAY be setting the stage for the next leg higher.
From a historical perspective, US presidential election years are typically flat for the first half then once the unknown has been priced into the market it does well into the end of the year. As well, many banks are reporting poor numbers due to the 'housing crissis' and the market cannot move forward without their participation. It will take at least a couple more quarters to get their balance sheets looking respectable again.......In other words, hurry up and do nothing!

Brian Beamish FMA, FCSI