The Bull Marches On

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

As has been the case for quite some time, the broader US stock market is moving higher. Both investors and traders where issued significant buy signals coming out of the US mid-term congressional elections in November. Most recently, we were issued yet another trader 'buy' signal, when prices broke above the Fall '10 highs at 122.31. Currently, stops should be just below recent support at or near 116.97.

From the fundamental perspective, the first two weeks of the quarter saw money move into Energy, Tech. & Financial. These three sectors all have the wind at their backs (rising energy prices, rising global demand for consumer electronics and a very steep yield curve) which will help an already rosy earnings picture. Couple this will a friendly US Fed. and we have the backdrop for a continued fundamental push higher into the spring. 

From the technical perspective, there are two major bullish forces at work here.

1. From a longer term perspective, the recent break above the  Spring '10 highs implies an upside bullish flag pole formation where the target is near $155 dollars per share on SPY [(120-65)+100 = 155]. This formation will be in place until a corresponding 'top' is registered or the market breaks back below 100 again. This may take months, if not years to play out but unless some catastrophic meltdown occurs, prices over the longer term are pointing much higher.

2. From a shorter term perspective, the break above 122.31 eight weeks ago implies a very short term bullish flag pole formation where the target is near $136 dollars per share on SPY [(122.31-103.19)+116.97].  I see no reason why this target won't be hit in the coming two quarters. We are into the seasonally friendly time of year for stocks and the market has lots of momentum behind it.

Enjoy the rally and be sure to take some profits along the way!

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

Climbing the wall of worry

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

 

With the new year and new quarter upon us, CRI has been patiently waiting and watching to see where we might be heading over the coming months*. Considering the significant bottom in the US dollar and tops in the Euro. & gold, we may be getting an indication already of what to expect for Q1'11.

Specifically with regard to SPY, the repeated message must be:

'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').'

Currently, stops on this trade should be just below the recent lows at 116.97. Considering that level is more than 10 points below current levels [with short term support near the 13 EMA (121.69)] new purchases ought to be delayed until some sort of consolidation comes in. On a longer term basis, investors ought to take some solace in the fact that the market has broken cleanly through the spring 2010 highs. This monthly breakout suggests the current cyclical bull run is far from over.

That's all for this week,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

 *The first two weeks price action each quarter is a really good guide as to where new money may be flowing during the entire quarter.