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
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