The bull keeps charging on

Hi there, and welcome back to CRI's S&P 500 blog.



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

The march higher goes on and on

Hi there, and welcome back to CRI's S&P 500 blog.



The broader market has shown considerable resilience as we head into the last weeks of the third quarter. The S&P 500 is now (as of printing) up almost 18% year to date as the perception of an end to the recession is being priced into the market. Considering the time of year, one has to ask if this rally is sustainable. Significant technical targets have been reached and the market is dramatically over bought on the daily charts. Specifically, the gap at 108.02 (from last winter) has just recently been filled in and the market has completed a 50% retracement of the entire bear market move that started in earnest in the fall of 2008.

Regardless of what may happen, what is happening is the market is moving higher so for those traders out there, enjoy the rally and be sure to be quick on the trigger should any sort of top come in.

Looking back in hindsight one can appreciate the significance of the cross of the 13 weekly EMA back above the 30 weekly SMA back in May. Currently this indicator is still bullish with little sign of breaking back down in the short term. Should the rally indeed continue, my next significant technical upside target will be the 200 weekly SMA (currently in the 120 area) and then the top of the current upward pointing channel at or near 130.

As suggested previously, I do believe a short term correction is needed to relieve the current daily over-bought condition. As a result, I personally can not and will not add to any long positions until this happens. I may just sit in cash but I am happy being safe rather than being sorry...

That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

Full Steam Ahead into Labor Day

Hi there, and welcome back to CRI's S&P 500 blog.



The market's direction is little changed since the last blog entry. The S&P 500 index [the index I like to use as a proxy on the broader stock market] continues it's relentless march higher into the Labor day holiday. Long standing targets are now within arms reach as we have slowly moved up over the past few months. So much so that we are now within 40 points of reaching into the gap between 105 and 108 and very close to the 50% retracement level of this entire bear market slide.

The very simple, yet quite consistent, timing indicator (13EMA vs. 30SMA) flashed a bullish signal in May when the short term average crossed back above the longer term moving average. These averages are now quite comfortably bullish and any correction in the seasonally weak fall period ought to be considered as a correction and nothing more for the time being. While I fully expect the lows of last March to be tested again in earnest, I do not think that will happen for some time (mid to late 2010 at the earliest) as the above mentioned moving average indicator takes many weeks (if not months) to go from bullish back to bearish.

Having said that, I fully expect some sort of pull-back heading into September/October as these are historically the worst performing months for equities generally. It ought to be noted that the current stock market rally is now more than 100 days old which in itself is a rather rare occurrence. The people at chart-of-the-day recently put out a piece speaking to this point (link: http://www.chartoftheday.com/20090828.htm?T)...

Short term traders ought to still be looking for the market to move higher into the holiday weekend while long term investors ought to sit tight on currently holdings and wait for the next pullback if considering any additional purchases...


That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

The late summer grind higher continues

Hi there, and welcome back to CRI's S&P 500 blog.



As has been the case for several weeks now, the broader US stock market continues to work its way higher into the late summer. The 13EMA/30SMA bullish signal from this past May was indeed correct and there are still two long standing targets on the SPY remaining to be hit (that being the noticeable gap on the weekly charts at 108.02 and the 50% retracement level at 108.765). Considering the typical seasonal strength we often see into the labor day weekend, it would not surprise me to see these targets hit over the coming few weeks. Once we are on the other side of the upcoming holiday (and hopefully those targets have been hit) all long side bets are off in my mind and I will be preparing in earnest for the upcoming fall. Having said that, there are still a few weeks ahead of us until that time and there are no 'sell' signals in place to speak of so I am still tilting towards the market moving higher in the short term.

It is interesting to see how both the Chinese stock market and the US government bond market are suggesting the equity rally may be running out of steam. The Chinese market broke first two years ago and while I don't see a 'crash' scenario just yet, I believe that market will lead the world in its direction again. For the record, I still do have on my short proxies in the US financial sector (long deep in-the-money GE puts & GS puts while being long TLT calls) and I will be more than happy to add to those positions on any serious breakdown as we head into the seasonally horrible time of the year (Sept. & Oct.)

That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

Late summer strength may lead to long standing targets being hit

Hi there, and welcome back to CRI's S&P 500 blog.



As previously stated, the market briefly broke down in the early summer and has reversed course and headed higher. While I myself am not overly bullish, one must respect the price action and go with the trend for the time being. It is interesting to point out how the very simple 'investor' timing signal (13 EMA vs. 30 SMA) suggested the bear slide that began two years ago, ended in May. As well, both the 50% level and a large gap sit in the 108 area on the SPY. Quite often I find that these two technical indicators coincide so seeing this isn't too big of a surprise. Can we get to that target before the seasonally weak period (September and October are historically the worst performing months for stocks generally) kicks in? Only time will tell, but for the time being the market is pointing higher so enjoy the rally. Once we get past Labor Day, all bets are off and I would fully expect some sort of pull-back. Currently a 50% retracement of the up move from the March lows sits ([66.62 + 100.86]/2 = 83.74) in the 84 area and that shall be my target for any significant sell-off over the coming 2 1/2 months.

That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

A head fake & a move higher

Hi there, and welcome back to CRI's S&P 500 blog.



Many of the recent tops in world equity markets have been broken to the upside. WCTS suggests equities in general ought to move higher through August as low volumes and bullish comments from central banks suggests there is little resistance to higher prices. One ought to be careful about getting too bullish in the short term as we are approaching significant technical resistance (both the gap and the weekly 50% level). As well, the September/October time frame is usually not very kind to stock prices. Having said that, we are moving higher in the short term so enjoy the rally...

Investors were given the 'All clear' signal in May (when the 13EMA crossed back above the 30 SMA) and while I have been reluctantly bullish that indicator has been correct. Traders have been given the all clear to be long on this week's break through the June highs. A word of caution though, the lows from March were "V" shaped suggesting that they ought to be tested in earnest a some point down the road. For the time being I will remain on my long tech./ short financial proxy and have added to that trade idea with the recent purchase of Jan '10 GS $120 put options. I will use the rally over the coming weeks to add to that trade as the chart below suggests that even a 50% correction of the massive rally over the past 6 months ought to bring prices back into the $110 area...



That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

Here comes the pull back

Hi there, and welcome back to CRI's S&P 500 blog.



The seasonal rally into the spring/early summer has come and gone. We are now comfortably within what is known as the 'summer doldrums' where many stocks drift. On top of the seasonal weakness that lies ahead, the economic backdrop has not improved appreciably over the past six months. Indeed, many economists are suggesting that the past 'stimulus' packages have not done enough to turn the global economy around (and specifically North America). Politicians will only throw more money at the markets when they feel their jobs are at stake and that only happens when prices are in free fall. I hope for all our sakes it does not have to come to that again, but be warned, the best of the market for 2009 may be behind us.

Of note recently, the ever so slightly bullish breakout seen only a few weeks ago on the SPY has failed in earnest. Those that played that long trade should have been stopped out. I myself have been counseling to be short of stocks (my proxy has been GE Dec Put options) and long of Gov't bonds (again my proxy has been TLT Dec Call options). Both trades have performed very well so far and yet I do believe that there is more of the same price action to come. On top of the fact that the politicians at the G8 meeting have lost interest in 'stimulus' talk, we are heading into Q2 earnings season and it may just be very ugly.

My hunch has been to expect a test of the trading range established over the past 6 months and specifically a test of the 73.22 level on SPY. Once that has happened I believe we shall get a bit of a late summer rally to set us up for a climactic push lower some time in the fall.

That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com