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

Grinding out the trading range.

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



The market is testing the upper end of the recently established trading range of the broader market benchmark S&P 500 stock index (SPY range between 115.15 and 104.58). Since the 13 EMA is still above the 30 SMA we have no choice but to continue to look for higher prices heading into the seasonally strong time of year for stocks. There is an adage in the market that says, "Sell in May and walk away" and judging how risky this market is getting, that isn't such a bad idea.

Further to that point, notice the circled area on the chart above! Markets normally move in a zigzag pattern - rallying, then giving back, then rallying again. This ebb and flow in the market is healthy and normal. Investors move from optimistic to pessimistic and back again over the course of a normal business cycle. With the extreme disruption credit crisis often inject into the system, the past few years have seen this normal market psychology disrupted. Now, instead of normal monthly ups and downs, we are into quarterly and yearly ups and downs as recession/growth are priced into the market. Here is my point to this week's commentary - The last recession (2000 to 2002) saw the market move dramatically lower into the end of 2000 only to see a nice rally out of the winter of 2001. Then in September, 2001 the market moved back to new lows. We could very easily roll over at some point over the coming few months as this rally is more than twelve months old. And since there is very little zigzag to the chart above, it means there is little support should prices start to head back down again in earnest.

While this isn't the case in the short term (our 'investor' signal still remains bullish), one must appreciate the dangerous nature of recessions and how we ain't out of the woods yet!


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

Stuck in a trading range

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



The correction cycle has played itself out (5.5 weeks after an 11 week rally) and we are now waiting for the next piece of significant economic data to break us out of this current trading range.

One analyst's opinion (Elaine Garzarelli) suggests strength will come from the industrial sector - considering the dramatic increase in cap-ex spending reported in the latest Chicago PMI report [For more on this please refer to the latest edition of The Canadian Rational Investor's newsletter (Q1'10) recently published and posted to the site]. While this ought to help the Dow Industrial Average, SPY might under perform because of its consumer weighting. Regardless, we here have been looking for the market to move higher into the spring and this might just be the piece of data the market is looking for.

As was the case last week, the SPY is currently range bound between the highs at 115.14 and the recent lows at 104.58. The 13 EMA remains well above the 30 SMA so our 'investor' stance remains bullish. Considering the seasonality, the extremely steep yield curve (again please refer to Q1'10 CRI newsletter for more) and a now washed out investor sentiment, one ought to continue to look for higher prices in the not too distant future.

Once the seasonal window closes, there could be a lot of trouble for the market. That does not happen till June, so until then I shall remain cautiously bullish with an expectation that the highs of late will be taken out in earnest over 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