Market over-view heading into Q3'10 end

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

As CRI prepares for the quarter and year end, this week's S&P 500 Blog will include a quarterly review of SPY, (and for all you Canadian's out there) the TSX Composite and TSX-Venture exchanges.

SPY

As has been the case for many weeks now, the SPY is pointing higher. Regular readers of this blog will recall CRI's bullish enthusiasm coming out of the US mid-term Congressional elections and the announcement of the US Fed's QE2 program. Fundamentally we experienced a dramatic political shift in Washington coupled with a guarantee of an additional $600 billion in Fed. bond purchases before the end of Q1'11. Technically, the market registered a very well defined double bottom breakout from 112.58 (our 'trader buy signal') coupled with a nice cross of the 13 EMA back above the 30 SMA (our 'investor buy signal').

As a special treat this week we added what CRI would consider to be the significant up-trend lines on the above chart. Notice the 2009 bull run was dominated by line 1. So far the year 2010 bull run has been dominated by line 2. CRI is expecting this trend line to hold up for the time being but if it should fail, next significant support is line 3. Notice that a 50% retracement of this entire bull run brings prices right back to line 3. at around the 95 area so keep on eye on this line should things start to get ugly again.

TSX Composite

The primary stock index for Canadian investor, the S&P TSX Composite Index is a basket of stocks very much like the S&P 500 index in the US. The Canadian stock market is dominated by commodity related assets as Canada is a very rich commodity nation. From wood to oil to gold, Canada has it all and its products are very much in demand. Very much like its southern counterpart too, the Canadian stock market registered a significant buy signal in the middle of September when prices crossed back above 12,321. Canadian interest rates are very stock friendly, a large portion of the $600 billion Fed QE2 program is going directly into commodity related assests and Canadian corporate earnings are in far better shape than their US counterparts. Given this fundamental backdrop, one should not be too surprised to see rising stock prices. Applying the same technical logic as SPY, one can clearly see a massive Bull flag formation that has been carved out over the past 2 years. The conservative upside target here is 13851 (with an aggressive target near 16,000!) and considering the violently bullish nature of many commodity markets of late, a move to this conservative point would not be too big of a surprise.

TSX-Venture Exchange

Probably the most surprising to the investment community has been the dramatic comeback in the Venture Capital market of late. Above is the Canadian equivalent of the Russell 2000 stock index in the US. This index represents the smallest companies in the Canadian universe and as you can see from the chart above, the move higher over the past two years has been dramatic. But more dramatic was its initial fall. Consider that the market has just now gotten back to the 200 week EMA. In essence, when the rest of the market came back in 2009 the venture market was still in panic mode. If one considers that corporate borrowing rates in North America have fallen from about 2% this time last year to about .5% now, it makes sense that the speculative market is finally starting to see investment capital again. Unlike their larger brethren, venture stocks took off like a rocket heading out of the summer and into the fall. The election and subsequent QE2 announcement was further validation for this index. What is interesting here is that if one looks at the Point & figure charts (link) we still have some way to go till we get to our target (2640 area). Like the major index's, the venture exchange has a bull flag working too. The formation here suggests that prices want to move up into the 2355 area. 

Summary

North American stocks are in a massive bull wave which is pushing prices higher across the board. Canadian stocks look to benefit from the move higher in a greater degree than US stocks because of the better structure of the Canadian banking system, a friendly macro trend towards commodity related assets and a strong currency. The first two weeks of Q3 suggested money was going to be flowing primarily into Basic Materials, Energy and Tech. Two of which are a hallmark of the Canadian investment landscape, need we say more...

The markets never move in a straight line so CRI will be looking for ebb and flow to this move higher but make no mistake, equities are moving higher and if you are not participating you will be left behind.

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

Irrational Exuberance Once Again?

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

The brief consolidation that followed the post mid-term US Congressional election rally (try saying that 10 times fast!) has resolved itself bullishly. So much so that one has to realistically expect to see much higher prices in the weeks to come. Indeed, if the bullish flagpole formation (that has been registered with a move above 122.95) is to be believed, then our target must be in the 137 area or more than 11% higher than current prices.

Regular readers will of course be well aware of CRI's bullish stance on SPY (specifically when the SPY crossed back above 112.58 confirming a double bottom breakout AND an 'Investor' buy signal was registered when the 13 EMA crossed back above the 30 SMA) as of the middle of September. The most significant development of the three week consolidation is it has allowed those that bought the breakout at 112.58 to finally have a new support zone to move their collective stops to (actually just under the support zone....like 117.64 for instance). 


So what might be going on fundamentally to prompt such a move? CRI's opinion has been that the triple effect of QE2 ($600 billion of 2-5 year US government bonds by the US Federal Reserve through Q1'11) , relatively strong corporate earnings and the balancing of power within the US Federal Government has laid the ground work for a 'perfect storm' for stock appreciation.


So where is this $600 billion going? CRI publishes a report every quarter that helps in determining where new money is flowing: 1st 2 weeks of Q4'10 Report. The last report suggested money was moving primarily into the Basic materials, Energy and Tech. sectors. Indeed, these areas have done well and CRI shall be concentrating efforts for the remainder of the month to trade these sectors accordingly. For an idea of what CRI is buying right now, subscribe to CRI's OnlyDoublesNewTrades to get the low down on what CRI likes right now.

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

Four weeks of consolidation leads to new stops

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

The ten week breakout that preceded the US mid-term congressional elections is now in its fourth week of consolidation. Some simple technical targets suggested the market had three significant support zones (the 117 area, the 114 area and finally the 112 area). Considering a natural 50% retracement of the ten week rally would have brought prices back into the 113 area [(103.73+122.95)/2=113.34] that was CRI's objective on this latest wave of selling. The move into the low teen's didn't materialize as both international tensions (Korea, Ireland) and domestic tensions (repeal of George Bush's tax cuts) seems to have melted away. and while everything seems cordial in Washington these days, I might be inclined to chalk the current market up to a combination of lame-duck old Congress and an early Sanata Claus rally. Regardless, enjoy the higher prices while they last.


Our most recent lament about the market concerned the fact that while the most recent buy signal was indeed correct, it left us long the SPY from 112.58 with stops remaining at (or just below) 103.73. The four week consolidation (which registered a significant low at 117.59) has now given us a new level to move our collective stops to just under. Going forward then, those that did buy SPY at 112.58 ought to now have their stops sitting just below the lows of three weeks ago at or near 117.58. Should we get a reversal in the next couple of weeks (highly unlikely) then this would actually turn into a shorting opportunity....but we will cross that bridge when we come to it.


Ideally we would live the market to consolidate for another week, then break higher. If that does happen then we would have completed a natural 5 week consolidation after a 10 week rally. Additionally, this price pattern would represent a very short term bull flag pole formation and would suggest prices want to get up into the 136.81 area [(122.95-103.73)+117.59].


but lets not put the cart before the horse...

Summary


The market registered a significant 'trader' (double bottom breakout) and 'investor' (13 EMA crossed back above 30 SMA) buy signal when prices crossed the 112.58 level back in September. 


If one were to be long SPY, one should be long from 112.58 with stops just under weekly support at or near 117.59. Tech., Basic Mat., Energy were 'Q310 1st 2 weeks best performing sectors and that shall be where I will concentrate my trading efforts over the coming few weeks into the end of the quarter. OnlyDoubles trades have been tearing the market appart (3 doubles in October alone!) and is well positioned to take advantage of any move higher should it ocure.

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

The slow consolidation continues

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

As has been the case for the past three weeks. We are slowly consolidating the 10 week bull rally that preceded the US mid-term congressional elections and the official launch of 'QE2. 

Both traders and investors were given a clear signal to 'get-in' when prices broke above 112.58 back in mid September. The market indeed rallied to take out the spring highs (which in itself is a monthly double bottom buy signal) a move of more than 7 percent from the breakout. Unfortunately, the move higher was almost straight up, suggesting there needed to be a few weeks of consolidation before we can expect another move higher in earnest. That consolidation is happening now. 

Technically

we are a bit over-extended but not badly. We have several moving averages just below us to provide support so I wouldn't be surprised if the above mentioned support areas (refer to chart) are indeed strong enough to hold prices up.

Fundamentally

we are OK here too. Both a friendly yield curve and solid corporate profits shall help things going forward. 

The problem

1. Corporate scandal, As long as we keep reading about one scandal after another both fines and lack of focus shall hinder corporate profits in specific sectors. Specifically the financial sector this go round.

2. No-one likes war. So if the bullets are flying for real in Korea one ought to expect both a substantial rally in the US Dollar and a soft stock market. This is known as a systemic risk and no matter how hard one tries, one cannot control it. If it happens we just have to deal with it. Interestingly though, this may be the reason the market corrects (as we have been expecting) and once the event has passed the market may go through a dramatic period of catch-up as the fundamentals (earnings & interest rates) have remained relatively friendly through this whole time period.

Summary

If one missed the original buy signal (112.58) then one may have an opportunity to enter at or near that level again as prices have been (and are expected to continue to be) consolidating for a few weeks. For those that did the trade, stops still remain just below the double bottom (103 area). The low of this consolidation shall represent our new stop if and when it comes.  In the short term, it shall be hard for the market to breakdown in earnest as there currently exists significant support from 111 to 117. So I wouldn't be surprised it our stop is moved into this area but we will just have to wait and see if and where it comes. Having said that, if war does breakout on the Korean peninsula one would be best advised to cover any long positions and ride the uncertainty out in cash. While it isn't a specific recommendation, it is common sense in the trading world...

When someone asked me what would cause the market to correct after the recent 10 week bull run I had to reply, 'one can't write better fiction than reality'

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

Moving Higher But A Little Over-Extended

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

It has been a  few weeks since the US mid-term congressional election and the FOMC's QE2 program launch. The market ran up into both events in a classic 'buy-on-the-rumor' and unfortunately it looks like we have begun the process of 'selling-on-the-news'. While there hasn't been any longer term technical damage done, it wouldn't surprise me if this 'correction' continues for at least a few more weeks. Irish debt, rising Asian inflation and a lot of supply of stock (GM IPO etc) are just a few issues the market is dealing with at the moment. And until we see some sort of capitulation, I won't be in a big hurry to be back on the long side from a trading perspective.

So lets go take a look at the chart to see where we might be heading [please refer to chart above]. This has got to be one of the more busy charts I have looked at in a while!

Lets start off with the longer term perspective - The move through 120.89 is significant from a longer term perspective as it represents a monthly double bottom breakout in the market. Stops on that monthly trade should be at or just below 100. While I am not taking this trade on (way too much risk for my liking) it is important for us to both recognize and appreciate what the market is trying to tell us. Specifically, the economic backdrop for stock growth going forward is OK (ie. yield curve is friendly, interest rates are low, and earnings are high). Additionally, there is still a lot of pessimism out there which unfortunately for the public is actually bullish.

Now the shorter term time from - Even from a weekly perspective, we are getting over-extended. The last major buy signal on the SPY was at 112.58. One should have stops working for that trade just below support at 103.73. This is all well in good if you did the trade (you are up almost 8 points or about 7%). The move up was ten weeks in duration and almost straight up. This straight line move up unfortunately has not given traders an opportunity to move stops. The current correction is the way for the market to find a new support line and once that is established then those that did the trade at 112.58 will be given a signal to move stops accordingly. 

So where am I thinking this new support line will come in? To me it looks like we ought to be shooting for a move back towards the 111 to 113 area. As well as there being a gap at 111.09 that needs to be filled in, a 50% retracement of the most recent move higher would bring prices back to 113.34. Lastly, all three moving averages are bunched up tightly between 111 and 116.

In summary then, investors and traders were given a huge buy signal in the broader stock market in the middle of September when prices crossed back above 112.58 and the 13 EMA crossed back above the 30 SMA. For those that did the trade, look for a nice pullback in price and then a subsequent move higher to move stops. For those that missed it, look for the anticipated pullback to try and enter the trade at the original buy point (112.58) or after the market has consolidated for another few weeks and then breaks out higher.

Either way, if you are a regular reader of CRI's offerings then you will definitely here it from here...

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

The Bulls are firmly in control - for the time being

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

The important US mid-term congressional elections have come and gone and now we must get used to the new reality coming out of Washington (with regard to major US Federal legislation changes). Interestingly, it looks like the market has gotten exactly what it wants. The Republican win in the House was enough to dislodge the Democrat stranglehold while at the same time, wasn't significant enough to be considered any type of mandate. In essence, little to no change in US Federal Government fiscal policy ought to be expected for the next two years. 

This bullish enthusiasm can be clearly seen in the price action. The chart above (as always) is the ETF for the S&P 500 stock index. It represents a basket of the 500 biggest stocks in the US. Since many US companies derive their revenue from international sources, this one index is an excellent proxy for world equities in general. This past week saw the index break to new 52 weeks highs and more importantly, crossed through the spring '10 peak at 120.85. Ideally, we would like to see the market finish two consecutive weeks above that level but make no mistake, the break higher was/is bullish for equities over the longer term going forward.

[The big picture.....If one can look at the market from a little longer time perspective, one can justifiably make an argument for a long term buy signal to be registered on a weekly close above 120.85 (with corresponding stops just below the most recent correction lows of 100.59). This price pattern (known as a bull flag formation) suggests prices want to ultimately move up into the 155 area [(120.85 - 65.65) + 100.59 = 155.79]. I know it sounds crazy, but given the additional $600 billion in bond purchases announced by the Fed and the propensity for Washington to be un-able to get in Wall Street's way.....leads this investor to believe this all may happen.]

Having said all that.....please don't inturprete this price action as a good entry point for either a trade or a longer term investment - Here's why: 

1. We already were told to get back into equities nine weeks ago (apon the double bottom breakout on SPY at 112.51). The market is up 7% from the breakout....so if you missed it, then you missed it.....

2. The stop on the current trade is STILL just below 103.73. This means that even if you are long from 112.51 you still have to risk the market moving down into the 103.73 area without closing the position. That represents almost 17 points lower than where we are now (or 14%!). No indeed, if you didn't do the trade nine weeks ago then don't chase it!

3. Our time tested 'Investor signal (that being the relationship between the 13 EMA and the 30 SMA) turned bullish (right around the time of the price breakout through 112.51) and is now quite extended in the bulls favor. Again (this time from the slow 'Investor' signal system) if you missed the trade, then you missed it...

So what does this mean going forward?

The US Federal Government (in the form of the US Federal Reserve Board) is spoon feeding the market capital. Additionally, there will be a lot of rhetoric but little substantive change to US Federal Government's fiscal legislation for at least the next two years. Historically, the years following the US mid-term congressional elections are often very good. The market told us to buy a little over two months ago. Other than an expected technical correction (ie. a 50% retracement of the recent move on the SPY would bring prices back into the 112 area [(103.73+122.09)/2]) there is little standing in the way of prices moving higher over the next few months. With this in mind, one ought to seriously consider any correction a buying opportunity.

Strap on your safety belts, we are in for a wild few years ahead of us!

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

US Congressional Mid-term elections are finally here

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

The much anticipated US mid-term congressional elections are finally here! Long time readers will of course be familiar with our expectation of both a Republican win (more so for the House than the Senate) and more importantly, that the market had little choice but to rally into that event. Coincidentally, the US Federal Reserve Board is meeting today and tomorrow to both decide the near term direction for US short term interest rates but also to consider the size and scope of the much telegraphed 'QE2' program talked about over the late summer and early fall.

It is interesting to see how the market has slowly worked its way back up to within 1 point of the spring highs. CRI was of course expecting this after a substantial 'buy' signal was registered the week of September 13th (when the market moved back above 112.58). For those that did the trade, congrats! You might even think about taking some profits as we are coming up to a significant resistance point (the April highs at 120.89). For those that did not, I wouldn't be surprised if you get an opportunity to enter at or even below that level in the coming weeks. CRI, of course, has done very well through this market rally. While not in SPY in particular, CRI has been busy 'making hey while the sun's shining'. (Three doubles in junior resource stocks for the month of October alone). For more information of CRI's actual trades please visit (CRI's OnlyDoubles).

Here is my thinking as to what one ought to expect in the coming weeks:
The market appears to be 'buying-the-rumor' (that being both an expected massive quantitative easing program announced by the US Federal Reserve and a more market friendly Republican party in charge of the US Congress).
The problem here, that may be exactly what they get and unfortunatly, that may mean more than what appears on first blush.
1. If the Fed is indeed embarking on another round of QE then does that not mean they see a further deterioration in the US economy in general? Classical economics suggests one likes slightly rising rates, not collapsing rates....So, ok, maybe the economy isn't that bad and they don't need to be as aggressive as last go round....is the market going to be disappointed? Too many ifs for serious money managers in my opinion.
2. If the Republicans come sweeping into power, does that not mean that current congressional programs may loose funding? Is there going to be a transition period? Is there going to be an outright freeze on spending? Again, too many ifs for serious money managers...

Fundamental Summary: There very well could be a 'sell-on-the-news' event. There will be a lot of new fundamental variables to calculate into the equation once all this news is out and it wouldn't surprise me if the market gave back 5 to 10 percent in a period of 'cooling-off'. Having said that, the backdrop for stocks is still very appealing over the medium term (very low short term interest rates and robust international corporate earnings). Additionally, there is a tendency for stocks to do well in the year following a mid-term congressional election. So whatever hangover comes from this big event, it probably won't be too long lasting.

Technical summary: While the market is still very much pointing higher (as both a double bottom in price and a positive 13 EMA vs 30 SMA relationship currently exist) one cant help but get the feeling we are a little toppy. Over the course of the past week we have failed on a few attempts to move higher. Additionally, the move through 112.85 has been uninterrupted which unfortunately means the original stop point (103.73) has not changed. Again, yes the market is pointing higher, but one must be comfortable with the 103.73 level being tested as that is the current key support level. My hunch; we do a 50% retracement of this latest rally [(103.73 + 119.75)/2 = 111.74 or about 6.5% off the high] then put in a base for the X-Mass rally. If one hasn't taken a position or either taken profits along the way, that correction window may be a good time to consider purchases...

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

Full steam ahead into November elections

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



As expected, prices have slowly worked their way higher as we get closer to the all important mid-term US Congressional elections to be held early this November.

Interestingly, (please refer to charts below) a web based futures contract trading service called InTrade.com has the House going to the Republicans fairly easily and the Senate literally a flip of the coin. While these are nothing more than projections at this time, one can't help but get the feeling the Democrats will not be in total control of the US government for much longer.



How this will effect Obama's remaining two years in his first term shall be seen but I wouldn't be surprised if things get mighty ugly. For instance, there are many Republicans in the House who are very interested in looking into Obama's actual birth records, it may be proven or drawn out over many months that Obama isn't a born American after all.....ugh!

Regardless of what may come, we must live in the here and now. With this in mind, the market is still pointing higher and I am very much long. While I am not in the SPY personally, OnlyDoubles subscribers will attest to the torrent of trading done recently and the plentiful opportunities out there to double your investments very quickly. I have been a metals bull for some time now and have found many Only Doubles trades to be done in the Junior mining market. But, of course, you will need to subscribe to the OnlyDoubles service to find out exactly where I'm putting money to work....

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

Late summer bottom pointing market higher

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



The double bottom that came in on the SPY over the late summer has indeed put a floor under stocks as we head into the mid-term US Congressional elections this November*. All major decisions regarding US Federal fiscal policy have been put off until the next Congress, and the US Federal Reserve has signaled that it will keep monetary policy loose for the foreseeable future and may even embark on yet more quantitative easing (which is just a fancy way of saying they may be printing more money). This has laid the current market backdrop.
1. The market believes inflation is not a threat
2. The market believes no-one is going to end the party until after the new year (and then there may be some really big changes)
Within this vacuum, prices ought to continue on their prevailing path. Stocks, bonds and commodities higher - US dollar lower. Ironically, this move could be quit dramatic considering the substantial bearish sentiment that was built up over the summer. Having said that, once on the other side of the event I would be reluctant to initiate any new positions. But hey, that is over three weeks away - and in that three weeks we may see some impressive moves...

Technical picture:
Two interesting developments through the month of September.
1. A double bottom in the price of the SPY was registered (refer to the A-B-C-D pattern outlined above). This price pattern (often refereed to as a 'W' price pattern) suggests there is substantial demand for stocks between 100 and 110. So much so that the supply has been overwhelmed and price has had no choice but to move higher in an attempt to find more supply. Traders will use this price pattern as an entry level. They will buy at the top of the range (in this case 112.58) and risk down to the bottom of the range (in this case just below point C or 103.73).

2. Our time tested moving average 'investor-signal' (that being the relationship between the weekly 13 EMA and the 30 SMA) is suggesting prices want to move higher and investors ought to participate. Interestingly here, the cross came at almost the same time as the double bottom. This in itself would be enough to pull me off the sidelines and I do believe investors ought to be long the market again. Specifically, one ought to be long from the 113 area. If not currently long then work open orders around this area.

So what does it all mean?
As has been the case since the late summer, one ought to be bullish and invested. I have talked extensively about the metal markets and that happens to be where my money is working currently (for more on these trades please refer to CRI's OnlyDouble's blog or CRI's CTS blog) but make no mistake....I'm long. I would not be surprised to see a dramatic blow-off top into this event and there is money to be made.
Specifically with regard to SPY, one ought to expect the 120 level to be tested in earnest and even broken. If this indeed happens, one ought to be looking for a continuation up into the 130 area but we will cross that bridge when we come to it...

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

*CRI course note:
Statistically speaking, when one sees a well defined double bottom price pattern [I have found over the past 20 years of doing this] that price will rise above 75% of the time. This is important because remember our '2 Rules of Investing' (1. use a system that is accurate 66% of the time and 2. don't risk more than 5% of your stake on any one single trade).

Selling eases ahead of US congressional mid-term elections

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



In a typical pre-election environment the stock market has taken a back seat to political rhetoric. I would be surprised if the market made any news of significance ahead of November. Once on the other side, all bets are off.

In a year when Democrats are making promises of further government spending (under the guise of 'stimulus') and the Republican party is literally imploding, the idea for change out of Washington is loosing momentum. While it is too early to call it, it would appear that it will be business as usual at least for a couple more years.

While the latest trader 'sell signal' has had its stop hit (113.18) our time tested 'Investor signal' is still bearish. Indeed, the 13 EMA is still below the 30 SMA. This suggests to me that the market is saying - don't be short......just be patient and wait.

If you must put the cart before the horse, one can make a trader buy argument. if you do decide the be long this market (and I don't) be long from the recent breakout at or near 113.20 with corresponding stops below the recent lows at or near 104.29. For those that need to trade, I would recommend looking at the gold (GLD) and silver (SLV) as these markets are in bull phases while SPY still isn't.

From a macro perspective, I believe the market can continue to move higher into the US election event but one should be very careful once it is over. Momentum is strong in the short term and volume is rising. On a side note, several cycle studies I have seen recently seem to back up the notion of a continuation of the most recent trends well into November.

But I must state again, once on the other side be very careful!

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

Caught in a downward pointing channel

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



A substantial rally never materialized this summer to the great disapointment of the bulls. the 113.20 level held firm with the market failing at 113.18. Since that time we have quickly moved lower and are now in the process of testing the late June lows (101.13). To be blunt - as we head into the often precarious season of fall, the market is looking a little ill again.

Regular readers will of course be well aware that we were issued an 'investor sell signal' now almost three months ago and those out there that do consider themselves 'investors' oought to be sitting on the sidelines waiting for the market to clean itself up. Considering the last 'investor-sell-signal' was in November, 2007 and the next buy signal didn't come until the spring of 2009, investors out there may be sitting on the sidelines for quite some time.

As for where CRI thinks the market is going in the short term - A simple 50% retracement of the 14 month up-move seems like a logical place to start. So having said that, my price objective is the bottom of the current downward pointing channel which happens to coinside with the indicated 50% level (at or near 93.27 on SPY).

I don't think this is going to be a mind bending correction considering the important mid-term US elections coming up in November. I do believe there is a really good chance we are setting up for a mind bending correction for 2011....but we will cross that bridge when we come to it.

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

The late spring correction grinds on

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



As we make our way through the summer-doldrums the stock market has moved very little. As has been the case for some weeks now:
1. 'Investors' ought to be sitting on the sidelines in cash (from the most recent 'investor-sell-signal' issued 9 weeks ago) waiting for the 13 EMA to cross back above the 30 SMA.
2. 'Traders' ought to be short from the most recent breakdown (just below 103.89) with corresponding stops above resistance (just above 113.20). While I do think this trade is getting a little old, as long as we continue to see lower highs and lower lows one ought to stay with it. With this in mind, one ought to have moved their stop now to just above last week's highs (just above 113.18).

The market rallied into the July US Employment situation report only to fail. In fact, we came within .02 points of the significant resistance - talk about a close shave!. The fact that we came so close and then failed suggests that the 113.20 area is a significant pivot point for the market. So much so, that if the market can move back above it, I would fully expect a rally to test the most recent highs (at or near 121 area) and traders should act accordingly.

A rally such as this could easily materialize as we head into the Labour Day weekend. Quite often in low volume times such as these, traders will search out markets for 'stop-orders' to try and make a quick buck. I wouldn't be surprised to see them do the same thing to the 113.20 area in the hopes that if they can push prices up there a whole bunch of stop-buy orders will be triggered. With this in mind, SHORTS BE CAREFUL....

That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
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Market setting up for a big move...

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



After a short break on posting the S&P 500 blog CRI is back with a timely update. Considering the significant role employment figures play in both the political and economic arenas, it should come as no great surprise that the market has slowly worked its way back into resistance ahead of the July Employment situation report to be issued tomorrow by the US Federal Government.

Since the market broke down some eight weeks ago (as indicated by the crossing of the 13 EMA below the 30 SMA) investors have been best to sit on the proverbial sidelines. Indeed, even though short rates are at historic lows, if one had 'gone to cash' on that signal, they would be better off. Traders have been given multiple sell points on the way down with the most recent being a short entry signal back in the week of June 28th when prices broke back below 103.85 (with a corresponding stop just above 113.20). This stop has yet to be hit and traders should still be short.

Regular CRI readers will recall our S&P 500 'investor-sell' signal and CTS blog post in which we detailed various stock indicates rolling over. As well, because the options premiums were too expensive, no position on our part was taken.

Having said all that, we have a very important pivot point coming ahead of us. Since we are now at resistance (113.20) a solid move above will represent a break of the most recent sell pattern. A failure here would solidify this point as a top going forward. Consider too the significance of jobs to the upcoming US congressional elections this fall, and one can easily see why this point in the market is so important.

So, should we get a friendly number on Friday then I could realistically see this market moving right back up to the old highs. If however, we get an ugly number, we could break really hard. Since the 50% level is still very much in play, that would be my target (93.27) on any meltdown. Watch for any traps on the news release (give the market a good hour before making a decision....just my opinion)

Do you think anyone out in the broader public realizes the significance of this.....I doubt it....

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

Rally back into resistance

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



As has been the case now for some weeks, the broader US stock market (as measured by the S&P 500 depository receipts - SPY) has been and continues to point lower. While the past two weeks have seen an impressive rally of almost 8%, we have yet to get back up into significant resistance let alone break any existing trends. The current bear flag pole formation (that was confirmed when the market moved below 103.89) will be solidly in place unless prices can get back above 113.20 (POINT A on the chart above). And as long as that formation is in place, I will continue to look for a move to its respective target of 95.55 (Point B on the chart above). Coincidentally, a natural 50% retracement of the entire 14 month bull run would bring prices back to the 93.27 area.

This therefore then shall be my target window going forward: 95.55 to 93.27.

For those investors out there, you should recall just a few weeks ago that we were issued an 'investor sell signal' when the 13 EMA crossed back below the 30 SMA. The SPY was roughly 110 and that shall be our high water market going forward. For those investors out there, one ought to just sit in cash for the time being and either wait for a 'market-panic' (it will be obvious when it comes) to do some cherry picking or for the moving averages to cross back bullishly. Frankly, I don't know which scenario will play itself out, but I have found that listening to the market is sometimes the hardest thing to do........and the market isn't happy right now!


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

Bearish momentum building

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



We are now entering our 5th week where the weekly 13 EMA is below the 30 SMA and the market has fallen 5% from that signal level. The typical seasonal top one should expect in the month of May has progressed into a cyclical top of the dead-cat-bounce that was initiated almost exactly one year ago. 'Investors' should be on the sidelines until this relationship corrects iself, 'Traders' should be cherry picking shorts as they become available...

Currently, the significant lows of just a few weeks ago (103.85) are being tested in earnest. Due to the five bearish fundamental circumstances listed in last week's blog, one ought not to be surprised to see lower prices and the trend for lower prices build. Along with the very simple 50% rule (suggesting real support in the short term exists near 93), a bearish flag pole formation is building. While not confirmed yet, a move through 103.85 would imply another 10% fall in the broader market. and would represent one of those cherry picker short positions a Trader might consider....

The recent G-20 meeting did little to calm the markets and may have even exacerbated the European debt crisis in that no clear direction can be seen by the group and even worse, European governments are stepping up 'austerity measures' when (according to Keynesian economic theory - Wiki link: http://en.wikipedia.org/wiki/Keynesian_economics) they should be doing the exact opposite.

With the stock market now no longer over sold and really on no-one's radar screen, it seems to this market participant there needs to be a great deal more monetary blood-shed before any further stimulus measures can gain political support.

Be careful of the danger of short term trades turning into long term investments...


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

Rally to trendline within bearish consolidation

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



For three weeks now we have been flashing a bearish 'investor sell' signal warning for the broader US equity market (as measured by the S&P 500 depository receipts - SPY). This signal was confirmed with the second consecutive closing of the weekly 13 EMA below the 30 SMA last week and has been given further validity with another bearish close this week.

Five reasons why stocks may under perform for the next little while.
1. Year over year & Quarter over quarter earnings comparisons getting difficult
2. Short term credit crunch back underway
3. Seasonal window of stock strength over
4. Government stimulus ending
5. Regulation building

Because of these fundamental circumstances a capitalist ought to be cautious at best. Adding in the poor technical picture and any Rational Investor ought to just sit on the sidelines until the public is panicking once again...

As for downside objectives. A 50% retracement of the 1 year bull run would bring prices back into the 93 area. Additionally, a breakdown through the lows of just a few weeks ago would represent a bearish flag pole formation and suggest a target around 95. Because of these two technical objectives I shall be looking for the highs of June '09 to be tested in earnest over the coming months...

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

Overhead resistance is building

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



The market has rallied off the lows of last week back into resistance (13 EMA & 30 SMA). More importantly, the 'investor' buy signal (registered May, 2009) has reversed and is now in a bearish stance (where the weekly 13 EMA is below the 30 SMA). While it is ever so slightly negative it is negative and as a result all those who consider themselves 'investors' in stocks ought to seriously consider liquidating those long positions and siting in cash for the time being.

For those traders out there, I do anticipate some sort of rally to begin in earnest for the first two weeks of the third quarter (the first two weeks of July) as new money is placed in sectors that are considered to be growing. Some sectors will outperform while other will under perform [for more on this be sure to watch for CRI's First Two Weeks of the Quarter report usually published the third week of each quarter). As for the broader market (as measured by the SPY) I anticipate considerable resistance to show itself on any move into the 114 to 116 area (or about 5% higher). Resistance is well established from the rally peak in early January (at 114.67) and the 200 week SMA (at 116.32). and I will use this target window (114.67 to 116.32) for an anticipated summer rally.

Should this mini rally take place over the summer months, I can see a potential Head & Shoulders price pattern forming. Should it play itself out, a breakdown this fall through a neckline (at 104.67) would project prices back down into the 86 area ([122.12-104.15]-104.15) = 86.18). Similarly, if one were to take a 50% retracement of the one year bull run, the target would be in the 94 area [(65.31+122.12)/2 = 93.715]. With these two numbers in mind, my target window for this fall's anticipated correction ought to be from 94 to 86. Which happens to be the trading range from the summer of '09.

Incredible how these things all come together like that, isn't it...

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

Has the party come to an end?

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



The seasonal top of early May has developed into a broader cycle top (as measured by the SPY - S&P 500 depository receipts - also known as the SPDR's ETF).

For several weeks now we have cautiously watched the market take back the rally that started in February (from 104.15). While this important level has held, several technical problems have developed over the past week that lead this market participant to believe that the one year bull run off the '09 lows has come to an end.

These include:
As well as failing to hold the 200 week SMA (in late April) the market has broken back below both the weekly 13 EMA and the 30 SMA. In essence, there is very little holding this market up going forward. So where is support, you ask? For help with this we ought to refer to the simple time tested 50% rule. This is where one takes the highs and lows of the last year and add them together (in this case 65.31 + 122.12) and then divide the result by two. Currently the 50% rule suggests that real support currently sits around 93.71 or some 14% lower than where we currently are. Additionally, our time tested 'investor' indicator (the relationship between the weekly 13 EMA and the 30 SMA) has now turned negative (as of printing 13 EMA at 112.14 and 30 SMA at 112.19).

While the market from a Daily perspective is quite oversold, I am now of the belief that any rallies going forward shall meet significant resistance in the 112 to 117 area. Should we be given an opportunity, one ought to consider a move into this area (over the course of the summer) to be a selling opportunity.

At the same time, those who are not inclined to 'trade' the market ought to just get out now. Indeed, this is a bold statement, but time and time again, I find that the charts tell you to act well in advance of the 'melt-down' and I do believe we are being given advanced warning that the party may indeed be over...


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

Peering over the edge

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



Due to being unavailable, CTS was not published this week at it's regular time and date. I have published this special weekend edition to bring readers up to speed with my thoughts on the broader equity markets...

The highs of early May are looking farther and farther away and the old time tested adage....Sell in May, and walk away seems more validated with every passing day. Traders, of course, got their sell signal when the rally failed at key daily support (just below 120) four weeks ago but investors haven't been given any new signals other than to be long and stay long.

The current correction is five weeks old and comes on the heals of an eleven week rally. According to cycle analysis, corrections are often half the duration of the primary move. So one may extrapolate that we are quickly approaching the end of the correction cycle window. Interestingly this week, we took out the lows of last week and the lows of three weeks ago but then quickly reversed to close up a little bit on the week. As well, we have not yet moved through the significant lows of last February at 104.15. What does all this mean? I don't think we are going lower. I think a substantial base is being formed at or near 104. Having said that, it also means that IF we do trade back below 104 now, the market may move down very hard.

Form a bigger picture perspective, I find it interesting that almost all of the equity markets followed in The Canadian Rational Investor's weekly Commodity Trend Spotlight have moved into STOP positions. This means that while the trend may still be pointing higher, CTS doesn't recommend being in the market. And frankly speaking, the futures markets are WAY too volatile for anyone to be trading the markets in earnest right now.

For more on this weekly service, please visit http://www.the-rational-investor.com/RI_Tradents.php#wklysumm

Continuing that theme, I thought I would add a 50% retracement of the lows of '09 to the recent highs to see where a correction in earnest ought to find support. While I don't have enough confirmation to really believe the bull run is over, the fact that CTS is flat on the S&P 500 (as well as many other equity futures markets) coupled with the fact that we are currently 10-15 percent above the 50% rule level, suggests to this market participant that at worst our expected seasonal top is officially 'in' and at best our upside objectives ought to be tempered for the time being.

Since our time tested 'investor signal' (that being the relationship between the 13 EMA and the 30 SMA) is still positive I must remain relatively bullish and will still look for the highs of May to be testing in earnest over the coming weeks/months and an ultimate test of the 126 area some time down the road. Should the 13EMA/30SMA relationship change I will change my investor stance. But lets not put the cart before the horse.


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

A big scare but no breakdown yet

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



For those that follow CRI's S&P 500 blog regularly, the dramatic drop seen recently should not have come as too big of a surprise. Nor should regular readers believe that the current bull run in the broader equity market is over either. For 'traders', profits should have been taken up top and the pull back should have represented a good re-entry point. For 'investors', the events of the past few weeks are literally a non-event. So the question one has to ask oneself is, what kind of stock purchaser am I?

Some interesting things to point out this week:
1. I find it incredible that the market dropped to 105.00 on the nose and that the latest weekly support point was (and still is) 104.16. In other words, the whole move was a non-event and we are still well contained within the weekly double bottom price pattern on SPY. This 'W' pattern was confirmed when the market broke-out (the week of March 8th) and moved above 114.67. Stops on that trade should have been set just below support at 104.16 and the dramatic move to 105 only meant that the trade was underwater, not closed. Those stops should now be moved to just below the recent low of 105.00. If that level is broken the the trade is over, but that hasn't happened yet.
2. Following the markets for over 20 years I have found that moves like this are not the end of the bull run. Rather, the quick move down has cleaned out the 'weak' hands and may lay the floor for another move higher. While my seasonal targets of 125 to 126 remain, I do believe we may be setting the stage for a substantial move higher over the coming quarters. Technically speaking, if the market can get back above the recent highs (122.12 on SPY) then one has to have an ultimate target up into the 137 area!
3. I couldn't believe how quickly the market pundits turning bearish. One would think that capitalism itself was coming to an end the way the media churned the story. So too about the Euro-currency. Stories of the end of the Euro and how the Euro system can't work have dominated the headlines. Yet all that is needed to calm the market's is some leadership. The Euro zone indeed 'stepped-up-to-the-plate' this weekend and the markets calmed appreciably.

So in summary then, traders got a great buying opportunity recently and investors are sitting long and enjoying the ride. Yes this consolidation in price may persist for a few weeks to come but no, the bull isn't dead yet....

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

Markets go boom....but its not as bad as you might think

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

This is a special edition due to the dramatic swings seen today in the broader stock market.



Lets start off by stating, stocks rarely begin bear markets with one day's price action. As well, one ought to keep in mind that 400 plus point moves in the Dow are usually seen at the end of moves not the beginning.

With the above in mind, lets take a good look at what is happening today and try to put it into some context.

1. Yes the market is down big today. But what is most interesting is that we DID NOT break the significant low registered in February at 104.15.....They took the market down to 105.00 but no further. What does this mean? It means that the primary weekly uptrend is still in place. Should the 104.15 level get taken out then I will have no choice but to declare this latest bull run to be over....but that has not happened so one must still look for higher prices to come. On top of this, the weekly 13 EMA is still above the weekly 30 SMA - so from a technical perspective, this down-move (so far) is nothing more than a healthy correction.
2. My latest post (Tues. May 4th) suggested to readers that we where officially into May and one ought to be looking for a correction. Time and time again I have stated the simple market axiom....sell in May and walk away....so a correction in May should be no big surprise to anyone.
3. My latest post also suggested that there was a small gap at 110.29 that needed to be filled in and that a 50% correction of the move up (which starting in Feb.) ought to take prices back to the 113 area (the market is 112.61 as of writing this note!). I also suggested that a move back to these levels ought to represent a buying opportunity for traders.

So in conclusion, this big down move should not have come as a surprise to anyone. The market has held key support (for the time being) and as long as it does, I shall continue to use pullbacks like we saw today as buying opportunities for traders. Since the 13 EMA is still above the 30 SMA today's action ought to be seen from investors as a non event.

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

p.s. indeed, stocks that I recently sold (like AOS-V and SSW-N) have fallen appreciable and I have started to buy them back :)

Traffic near our targets

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



We are now officially into the month of May and I shall be looking for a seasonal top in the coming weeks. For nine weeks now we have had two primary upside targets [The trading range breakout suggesting prices wanted to move an equal distance above the old range: 125.19 & the highs from Aug. 2008: 126.24]. While these specific numbers have yet to be hit, the market did rally to a high of 122.12 (or 3 points below our first target) just last week. Should this represent the seasonal highs, I would consider this to be a 'close-enough' move to satisfy our objectives.

If this indeed is the start of a short term correction one ought to expect at least a 50% correction of the most recent move higher. Our 'Investor' stop still sits just below the lows of February of 104.14. Add this to the most recent high (122.12) and divide the result by 2. The 50% level then is 113.13. As well, I do notice that there is a small gap at 110 that ought to be filled at some point down the road.

For the record, there are no specific sell signals with this current consolidation. Traders ought to look at this as an opportunity to buy stock on a pull back while 'investors' ought to just sit tight. The relationship between the 13 EMA and the 30 SMA still looks bullish and we shall remain 'investor' bullish until these moving averages cross again...

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

Up we go into seasonal peak

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



There is little new to report this week as we continue to work our way higher into the typical seasonal peak of April-May-June. As the cliche goes, 'Sell in May, and walk away' suggests, I shall be looking to exit the market in earnest once the seasonal rally has exhausted itself. That hasn't happened yet and we currently are no-where near any sell signals so for the time being I am long and enjoying the ride. I shall re-examine our position should either the 104.15 level be breached or our upside target window of 125 to 126 be taken out.

From a 'traders' perspective, recent suggestions to readers (AOS-V and SSW-NYSE) have done extremely well and those that did participate are encouraged to take profits when CRI does.

Since the 13 EMA is still very comfortably above the 30 SMA, 'investors' should be long and stay long. Once this relationship changes, 'investors' will have a signal to act.

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

The seasonal march higher continues

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



Sometimes this job can be a little boring! Indeed, the market has been pointing higher now for 11 weeks and the same upside targets remain. I am still looking for a serious test of the Aug. 2008 highs in and around the 126.24 area. Considering the seasonal nature of the stock market, there really is no reason for stocks to break down in the middle of April. So on goes the march higher!

As has been stated time and time again, there is an old market adage that says, 'Sell in May and walk away'. With this in mind, as a trader, I shall remain long into that seasonal peak unless the 104.15 level is broken (which I find highly unlikely). Investors, of course were given the 'buy' signal last May (when the 13 EMA crossed back above the 30 SMA) and until that changes, investors ought to just sit tight and enjoy the bull run.


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

Workin our way up to the top

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



Little new to report in this week's Blog entry. The S&P 500 stock index (as measured by the exchange traded fund: SPY) has been steadily moving higher over the past ten weeks. We were issued a new 'trader' buy signal when the market moved above the high of 114.67 on the week of March 8th. 'Investors' were issued a buy signal the first week of May, 2009 which is now almost one year ago (when the 13 EMA crossed back above the 30 SMA).

Upside targets currently are the trading range breakout target of 125.19 (where one takes the old trading range and adds it to the top on a breakout - in this case 114.67 - 104.15 = 10.52 + 114.67 = 125.19) and the highs from August, 2008 at 126.24.

Once these targets are hit I would be very leery about putting any new positions on until a healthy correction/consolidation takes place. Coincidentally, we are just about one month away from our seasonality-peak window for stocks (ie. sell in May and walk away). The fact that these two points are coming together so neatly ought to raise suspicions about how much further this market can go once the seasonal window closes.

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

Same old, same old

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



At the risk of sounding redundant, as expected - the market has been moving steadily higher since CRI's last post. While we remain within the seasonally good time of year for the market, I expect little in the way of corrections, and (for those traders out there) any pullbacks ought to be considered buying opportunities. Our 'investor signal' has been bullish since last May and I would expect that condition to continue for a little while yet. As for short term targets, I do believe there will be a fair amount of resistance at or near the 126 area. Until this target area has been hit or we enter the month of May, enjoy the ride.

On a side, while the market continues to point bullishly, I am more than happy to be long stocks that look like they could appreciate. Of particular note, AOS-V has been very kind to CRI of late. Refer to other posts for more on that but readers here ought to be aware of the various services CRI operates and how you may take advantage of this great information...

Hopefully, it will get you to the point where you might want to subscribe.....hint....hint....hint.... :)

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

The march higher goes on...

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



As per blog entries of recent, the market is moving higher as expected. The break of the top of the trading range (on SPY: 114.67) suggests the seasonal rally is alive and strong. But, (also as previously suggested) one must temper their enthusiasm about the market given the current technical picture. Yes we are moving higher but there is a lot of traffic ahead of us.

For this week I thought I would comment on what I see as the three significant factors effecting stock prices:
Fundamentally, broader market earnings comparisons are still relatively positive as we head into the second quarter of 2010 (that is comparing them to Q2'09 when the worst of the recession was being prices into the market) and the cost of money for short term borrowers is still virtually nothing. Should either of these factors change, stock market appreciation gets difficult at best.
Technically, the broader market continues to point higher as our 'investor signal' remains bullish (that being the relationship between the 13 EMA and the 30 SMA - which in this case is positive and has been so since May 2009) and the recent breakout higher in price confirms that. Those wishing to be bearish will have to wait for a new top (trading range) to form and a subsequent breakdown - which may be weeks if not months down the road).
Finally, seasonally. For long time readers of CRI commentary you will know that if its one thing I drive home it is the seasonal nature of the stock market. To that end, we are heading into the seasonal sweet spot for the broader market and for the commodities markets in particular. There are numerous reasons why this is so (which I don't have the time or space to go into here) but for our purposes, just keep it in mind when thinking of making your next investment.

[I personally will be looking to SELL in May and WALK AWAY....as the old cliche goes....]

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

Trading Range Breakout

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



As anticipated, the broader US stock market and many other world equity markets have broken the recent top of the trading ranges. In the SPY's case, 114.67 was taken out two weeks ago and has moved another 2.5 points higher since. Since our 'investor' signal had remained bullish (that being the relationship between the 13 EMA and the 30 SMA) throughout this latest pull back in price, we continue to look for higher prices as we head into the seasonally strong period of the year for stocks - Spring.

As for targets going forward, with all the talk of government's bringing a halt to bailout programs, my expectations for further gains this calendar year are limited. The charts seem to concur. Currently, I see three significant upside targets that (if hit) represent a maximum of 10% further gain on top of this years already 4.5% rise.

Since we have recently broken a potential top formation, the bears out there will have to wait for another consolidation in price and a further breakdown from there. In other words, no sell signals anywhere just yet.

My hunch is we will take a serious run at the 126 area in the coming weeks...


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