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
the-rational-investor.com

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