Full Steam Ahead into Labor Day

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



The market's direction is little changed since the last blog entry. The S&P 500 index [the index I like to use as a proxy on the broader stock market] continues it's relentless march higher into the Labor day holiday. Long standing targets are now within arms reach as we have slowly moved up over the past few months. So much so that we are now within 40 points of reaching into the gap between 105 and 108 and very close to the 50% retracement level of this entire bear market slide.

The very simple, yet quite consistent, timing indicator (13EMA vs. 30SMA) flashed a bullish signal in May when the short term average crossed back above the longer term moving average. These averages are now quite comfortably bullish and any correction in the seasonally weak fall period ought to be considered as a correction and nothing more for the time being. While I fully expect the lows of last March to be tested again in earnest, I do not think that will happen for some time (mid to late 2010 at the earliest) as the above mentioned moving average indicator takes many weeks (if not months) to go from bullish back to bearish.

Having said that, I fully expect some sort of pull-back heading into September/October as these are historically the worst performing months for equities generally. It ought to be noted that the current stock market rally is now more than 100 days old which in itself is a rather rare occurrence. The people at chart-of-the-day recently put out a piece speaking to this point (link: http://www.chartoftheday.com/20090828.htm?T)...

Short term traders ought to still be looking for the market to move higher into the holiday weekend while long term investors ought to sit tight on currently holdings and wait for the next pullback if considering any additional purchases...


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

The late summer grind higher continues

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



As has been the case for several weeks now, the broader US stock market continues to work its way higher into the late summer. The 13EMA/30SMA bullish signal from this past May was indeed correct and there are still two long standing targets on the SPY remaining to be hit (that being the noticeable gap on the weekly charts at 108.02 and the 50% retracement level at 108.765). Considering the typical seasonal strength we often see into the labor day weekend, it would not surprise me to see these targets hit over the coming few weeks. Once we are on the other side of the upcoming holiday (and hopefully those targets have been hit) all long side bets are off in my mind and I will be preparing in earnest for the upcoming fall. Having said that, there are still a few weeks ahead of us until that time and there are no 'sell' signals in place to speak of so I am still tilting towards the market moving higher in the short term.

It is interesting to see how both the Chinese stock market and the US government bond market are suggesting the equity rally may be running out of steam. The Chinese market broke first two years ago and while I don't see a 'crash' scenario just yet, I believe that market will lead the world in its direction again. For the record, I still do have on my short proxies in the US financial sector (long deep in-the-money GE puts & GS puts while being long TLT calls) and I will be more than happy to add to those positions on any serious breakdown as we head into the seasonally horrible time of the year (Sept. & Oct.)

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

Late summer strength may lead to long standing targets being hit

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



As previously stated, the market briefly broke down in the early summer and has reversed course and headed higher. While I myself am not overly bullish, one must respect the price action and go with the trend for the time being. It is interesting to point out how the very simple 'investor' timing signal (13 EMA vs. 30 SMA) suggested the bear slide that began two years ago, ended in May. As well, both the 50% level and a large gap sit in the 108 area on the SPY. Quite often I find that these two technical indicators coincide so seeing this isn't too big of a surprise. Can we get to that target before the seasonally weak period (September and October are historically the worst performing months for stocks generally) kicks in? Only time will tell, but for the time being the market is pointing higher so enjoy the rally. Once we get past Labor Day, all bets are off and I would fully expect some sort of pull-back. Currently a 50% retracement of the up move from the March lows sits ([66.62 + 100.86]/2 = 83.74) in the 84 area and that shall be my target for any significant sell-off over the coming 2 1/2 months.

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