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
