Hi there, and welcome back to CRI's S&P 500 blog.
As per last entry, we here at CRI are still looking for the 138.77 level (that being the small bullish flag-pole target) be hit in the short term. Having said that, one would be rather irrational not to expect a seasonal correction as we now are officially into the month of May. The cliche. Sell in May, and Walk Away isn't a cliche for nothing and so all investors should be well aware of the seasonal vulnerability the market may become subject to over the coming weeks. As of yesterday, the weekly high for the most recent weekly bar is 137.18 so if we did indeed top out here, I wouldn't be surprised. Notice too how we are consistently brushing up against the upper channel line. This line represents significant resistance and would surprise me if it were broken in earnest before some sort of pullback.
As investors, we know that the last significant 'investor-buy-signal' came in last fall at the conclusion of the mid term US congressional elections (at about 112) and when the 13 EMA crossed back above the 30 SMA. The market is up more than 20% (plus dividends) from that breakout so investors have nothing to complain about. The moving averages are still comfortably bullish, so there really isn't any cause for alarm. Stops on that trade should be just below recent support (at or near the lows of April near 129.51). Should that level be breached, it would signify a third test of the 13 EMA (which statistically isn't healthy) and may lead to greater price depreciation. These are all IF's and since none of these levels has been breached we must sit patiently on the long side and watch...
Traders have been given new bullish vigor with the most recent (above mentioned) bullish flag pole formation and ought to be looking for that 138.77 target to be hit in the coming days/weeks. Once hit, traders would be wise to exit on any sort of weakness or even have open orders to sell at or near that level itself.
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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