In very typical stock market fashion, prices turned on a dime last March and haven't looked back since. The very consistent 'investor' indicator (the relationship between the 13 week exponential moving average and the 30 week simple moving average) suggested the bear run was at an end last May when the 13EMA crossed back above the 30SMA. While our economy's underlying fundamentals remain poor and I fully expect the lows of last winter to be tested again in earnest (and most probably broken) the old cliche, The market can remain illogical far longer than anyone can remain solvent seems to be ruling the day. Exactly where the market stops is really anyone guess and as long as the 13EMA remains above the 30SMA I will continue to look for the market to move higher...
Conservative upside targets have been hit for the SPY. The market has filled in the gap at 107.52 and has completed a 50% retracement of the entire bear slide by trading back to 103.12. The next logical resistance area for the SPY is represented by the 200 week SMA which currently sits near 120. As well, this area represents a trading zone that I believe will bring sellers back into the market place. Having said that, the period of 1974 to 1976 saw the Dow move from 1000 down to 600 and then right back up to 1000. While there is no guarantee that this will repeat itself, there are plenty of reasons why one shouldn't be surprised if the same thing happens again...
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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