Hi there, and welcome back to CRI's S&P 500 blog.
The more I do this the more I am reminded that more than 80% of people who 'play' the market lose money. Only those that can remove emotion from trading can truly prosper. Case in point - those that sold (or even went short) into the panic of last fall are feeling the pain today. Indeed, if one were to believe the media, there is plenty to bring the markets down, and yet they rise. I myself was incredibly reluctant to believe the latest 'Investor' buy signal and yet here we are - moving higher. Having said that, with this past week's breakout through last spring's highs on the SPY we are registering yet another massive buy signal. As the saying goes, higher highs and higher lows define a bull market. Seasonally too, we can and ought to see the markets move higher. The current seasonal window closes near May which is several months away. Make no mistake, there are plenty of reasons to see a quick 1-2 percent drop. But unlike the last five months of 2011, pull backs ought to be considered as buying opportunities.
The current bull charge began some eight weeks ago. Traders and investors got the signal to 'get back in' in unison (which is rather bullish in itself). The signal was both a crossing of the 13 EMA back above the 30 SMA (Investor signal) and a double bottom price pattern (trader signal).
Traders Stance: As suggested above, one ought to be long now (from about 126.46) and that trade has been on now for more than seven weeks. Stops ought to be just below the recent significant lows and the 13 EMA (just under 130 area). The market is still pointing higher so I wouldn't be in a big hurry to take the position off; ultimate target is 143 area (weekly bull flag).
Investors Stance: Investors got the signal to get back into stocks at just about the same time as traders (in and around the 126.50 area). This 'investment' is up more than 7% so a period of consolidation ought to be expected at some point in the not too distant future. As the massive bull flag suggests an ultimate upside target of 143 (or a 13.5% capital gain from 126) will be the point when we officially suggest taking profits. That may not happen for many months down the road, but considering the January Barometer's reading, the fact that this is a US Presidential election year, and the fact we are very early in the seasonal trade, it does seem like a realistic target.
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca/RI_Tradents.php#sp500bloglink
http://www.therationalinvestor.ca/RI_Tradents.php#sp500bloglink
