A big scare but no breakdown yet

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



For those that follow CRI's S&P 500 blog regularly, the dramatic drop seen recently should not have come as too big of a surprise. Nor should regular readers believe that the current bull run in the broader equity market is over either. For 'traders', profits should have been taken up top and the pull back should have represented a good re-entry point. For 'investors', the events of the past few weeks are literally a non-event. So the question one has to ask oneself is, what kind of stock purchaser am I?

Some interesting things to point out this week:
1. I find it incredible that the market dropped to 105.00 on the nose and that the latest weekly support point was (and still is) 104.16. In other words, the whole move was a non-event and we are still well contained within the weekly double bottom price pattern on SPY. This 'W' pattern was confirmed when the market broke-out (the week of March 8th) and moved above 114.67. Stops on that trade should have been set just below support at 104.16 and the dramatic move to 105 only meant that the trade was underwater, not closed. Those stops should now be moved to just below the recent low of 105.00. If that level is broken the the trade is over, but that hasn't happened yet.
2. Following the markets for over 20 years I have found that moves like this are not the end of the bull run. Rather, the quick move down has cleaned out the 'weak' hands and may lay the floor for another move higher. While my seasonal targets of 125 to 126 remain, I do believe we may be setting the stage for a substantial move higher over the coming quarters. Technically speaking, if the market can get back above the recent highs (122.12 on SPY) then one has to have an ultimate target up into the 137 area!
3. I couldn't believe how quickly the market pundits turning bearish. One would think that capitalism itself was coming to an end the way the media churned the story. So too about the Euro-currency. Stories of the end of the Euro and how the Euro system can't work have dominated the headlines. Yet all that is needed to calm the market's is some leadership. The Euro zone indeed 'stepped-up-to-the-plate' this weekend and the markets calmed appreciably.

So in summary then, traders got a great buying opportunity recently and investors are sitting long and enjoying the ride. Yes this consolidation in price may persist for a few weeks to come but no, the bull isn't dead yet....

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

Markets go boom....but its not as bad as you might think

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

This is a special edition due to the dramatic swings seen today in the broader stock market.



Lets start off by stating, stocks rarely begin bear markets with one day's price action. As well, one ought to keep in mind that 400 plus point moves in the Dow are usually seen at the end of moves not the beginning.

With the above in mind, lets take a good look at what is happening today and try to put it into some context.

1. Yes the market is down big today. But what is most interesting is that we DID NOT break the significant low registered in February at 104.15.....They took the market down to 105.00 but no further. What does this mean? It means that the primary weekly uptrend is still in place. Should the 104.15 level get taken out then I will have no choice but to declare this latest bull run to be over....but that has not happened so one must still look for higher prices to come. On top of this, the weekly 13 EMA is still above the weekly 30 SMA - so from a technical perspective, this down-move (so far) is nothing more than a healthy correction.
2. My latest post (Tues. May 4th) suggested to readers that we where officially into May and one ought to be looking for a correction. Time and time again I have stated the simple market axiom....sell in May and walk away....so a correction in May should be no big surprise to anyone.
3. My latest post also suggested that there was a small gap at 110.29 that needed to be filled in and that a 50% correction of the move up (which starting in Feb.) ought to take prices back to the 113 area (the market is 112.61 as of writing this note!). I also suggested that a move back to these levels ought to represent a buying opportunity for traders.

So in conclusion, this big down move should not have come as a surprise to anyone. The market has held key support (for the time being) and as long as it does, I shall continue to use pullbacks like we saw today as buying opportunities for traders. Since the 13 EMA is still above the 30 SMA today's action ought to be seen from investors as a non event.

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

p.s. indeed, stocks that I recently sold (like AOS-V and SSW-N) have fallen appreciable and I have started to buy them back :)

Traffic near our targets

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



We are now officially into the month of May and I shall be looking for a seasonal top in the coming weeks. For nine weeks now we have had two primary upside targets [The trading range breakout suggesting prices wanted to move an equal distance above the old range: 125.19 & the highs from Aug. 2008: 126.24]. While these specific numbers have yet to be hit, the market did rally to a high of 122.12 (or 3 points below our first target) just last week. Should this represent the seasonal highs, I would consider this to be a 'close-enough' move to satisfy our objectives.

If this indeed is the start of a short term correction one ought to expect at least a 50% correction of the most recent move higher. Our 'Investor' stop still sits just below the lows of February of 104.14. Add this to the most recent high (122.12) and divide the result by 2. The 50% level then is 113.13. As well, I do notice that there is a small gap at 110 that ought to be filled at some point down the road.

For the record, there are no specific sell signals with this current consolidation. Traders ought to look at this as an opportunity to buy stock on a pull back while 'investors' ought to just sit tight. The relationship between the 13 EMA and the 30 SMA still looks bullish and we shall remain 'investor' bullish until these moving averages cross again...

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

Up we go into seasonal peak

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



There is little new to report this week as we continue to work our way higher into the typical seasonal peak of April-May-June. As the cliche goes, 'Sell in May, and walk away' suggests, I shall be looking to exit the market in earnest once the seasonal rally has exhausted itself. That hasn't happened yet and we currently are no-where near any sell signals so for the time being I am long and enjoying the ride. I shall re-examine our position should either the 104.15 level be breached or our upside target window of 125 to 126 be taken out.

From a 'traders' perspective, recent suggestions to readers (AOS-V and SSW-NYSE) have done extremely well and those that did participate are encouraged to take profits when CRI does.

Since the 13 EMA is still very comfortably above the 30 SMA, 'investors' should be long and stay long. Once this relationship changes, 'investors' will have a signal to act.

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

The seasonal march higher continues

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



Sometimes this job can be a little boring! Indeed, the market has been pointing higher now for 11 weeks and the same upside targets remain. I am still looking for a serious test of the Aug. 2008 highs in and around the 126.24 area. Considering the seasonal nature of the stock market, there really is no reason for stocks to break down in the middle of April. So on goes the march higher!

As has been stated time and time again, there is an old market adage that says, 'Sell in May and walk away'. With this in mind, as a trader, I shall remain long into that seasonal peak unless the 104.15 level is broken (which I find highly unlikely). Investors, of course were given the 'buy' signal last May (when the 13 EMA crossed back above the 30 SMA) and until that changes, investors ought to just sit tight and enjoy the bull run.


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

Workin our way up to the top

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



Little new to report in this week's Blog entry. The S&P 500 stock index (as measured by the exchange traded fund: SPY) has been steadily moving higher over the past ten weeks. We were issued a new 'trader' buy signal when the market moved above the high of 114.67 on the week of March 8th. 'Investors' were issued a buy signal the first week of May, 2009 which is now almost one year ago (when the 13 EMA crossed back above the 30 SMA).

Upside targets currently are the trading range breakout target of 125.19 (where one takes the old trading range and adds it to the top on a breakout - in this case 114.67 - 104.15 = 10.52 + 114.67 = 125.19) and the highs from August, 2008 at 126.24.

Once these targets are hit I would be very leery about putting any new positions on until a healthy correction/consolidation takes place. Coincidentally, we are just about one month away from our seasonality-peak window for stocks (ie. sell in May and walk away). The fact that these two points are coming together so neatly ought to raise suspicions about how much further this market can go once the seasonal window closes.

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

Same old, same old

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



At the risk of sounding redundant, as expected - the market has been moving steadily higher since CRI's last post. While we remain within the seasonally good time of year for the market, I expect little in the way of corrections, and (for those traders out there) any pullbacks ought to be considered buying opportunities. Our 'investor signal' has been bullish since last May and I would expect that condition to continue for a little while yet. As for short term targets, I do believe there will be a fair amount of resistance at or near the 126 area. Until this target area has been hit or we enter the month of May, enjoy the ride.

On a side, while the market continues to point bullishly, I am more than happy to be long stocks that look like they could appreciate. Of particular note, AOS-V has been very kind to CRI of late. Refer to other posts for more on that but readers here ought to be aware of the various services CRI operates and how you may take advantage of this great information...

Hopefully, it will get you to the point where you might want to subscribe.....hint....hint....hint.... :)

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