As we head into the 10th month of this recent market rally, one can't help but get the feeling the bull is running out of steam. Ironically enough, all we have done is rally the market back into resistance and into the lows seen through the summer of 2008. Indeed, the low of July, 2008 is proving to be a most formidable resistance point as those that missed the original sell point (at or near 115.68) are doing so now. Couple this with the 200 SMA (currently near 117) and one has a virtual brick wall of sellers waiting to hit the bid.
In the short term (for traders) one ought to expect the gap at 106.82 to be a solid target on the downside. That would represent a 7% correction from the peak and would bring us back into the 30 SMA support area as well.
In the medium term (for investors) one ought to be looking at this pull back in price as removing some of the excess enthusiasm the market has a habit of pricing in. Our investor 'buy' signal came in last May (from 85 area on SPY). Because the 13 EMA is still well above the 30 SMA we have no choice but to remain bullish and ultimatly look for higher prices down the road. Should that relationship change, our investor stance will change appropriately.
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
