Hi there, and welcome back to CRI's S&P 500 blog.
As has been the theme now for more than a month, the stock market (as measured by the SPY - S&P 500 stock index ETF) has corrected from an over bought condition that developed through the spring and early summer of 2011. The correction at the moment represents a healthy and normal market occurrence - the questions is, where do we go from here. Considering the seasonal nature of stocks, the looming US fiscal year end, and the considerable credit problem developing in Europe my hunch is we will be pointing lower for some time to come. Having said that, markets often look the absolute worst at the bottom. Things look rather bleak at the moment so as a contrarian notion, we must be getting close to some sort of climax . Regardless of personal opinion lets let the chart tell us what to do - and to that end lets review how our two primary market participants ought to be positioned.
Investors: Investors should be in cash! Until the 13EMA can cross back above the 30SMA you are best to leave your money in t-bills or short term US treasury notes that you intend to hold onto until maturity.
Traders: After a great short trade (through the break of 125.70) profits ought to have been taken. The past 5 weeks have defined the current market's trading range. Where a break of either (top 123.51 and bottom 110.27) would be your signal to act. We shall test the bottom of the range over the coming days so be prepared should you want to act.
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
