Ready for a big finish?

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



In what looks to be a classic parabolic move (inverted in this case) world equity markets are all pretty much moving in unison to the downside. (usually when all the equity markets move in the same direction at the same time it is a good indication we are nearing a proverbial bottom). Another great contrarian sign, Warren Buffet announced (through Birshire Hathaway) he would make a $5 billion dollar investment in Goldman Saches. Ever the horse trader, Buffet recieved an additional $400 million dollars worth of warrants at on GS $115. In my seminars and presentations I often make reference to Buffets classic market axium: Sell when others are buying and to buy only when others are selling. Indeed this appears to be the case once again. Hats off to the oracle of Ohmaha. Now all we need if for one of the major US newspapers or periodicals to come out with a cover story on the stock markets' poor performance and we will know the bottom is in!

Ok, now for the chart. From a technical perspective, we were given yet another sell signal on the SPY when it moved through the important low of $120 just two weeks ago. The bear flag pole formation confirmed with this move suggests prices want to move down to the $108 level. My hunch is we move down in some great climactic spike. This is the month to do it too! October often hands the market some stunning one or two day losses. The bottom of the downward pointing channel (that has dominated this bear move) currently sits near $115 and ought to be supportive in the short term. But if broken, look for another gut wrenching drop.

With regard to purchases of US shares; Until the dust settles from the staggering $700 billion dollar bailout package in front of the US Congress, I can't see any 'buy' signal coming in.

Keep those seat belts fastened, we ain't done yet


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

A big test, and another big failure

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



The anticipated test of the $120 level happened this week. Unfortunately, that test failed and the market has moved to new relative lows. The bear market shall go on for at least a little while longer. As the chart above indicates, we are comfortably within a massive weekly downward pointing channel that began almost one year ago. One encouraging development, we have hit the bottom channel line with today's sell off. Should we close below that important line we could be setting up for an even more extreme correction. Further bank failures, political ineptness or even international brinkmanship may precipitate such a scenario. Should that scenario play out, one ought to expect the market to move down into the$108 area. [bear flag target calculation: ($143.58 - $120.02) - $131.51].

Lets keep our proverbial fingers crosses, aren't we all a little tired of falling prices....

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

Getting close to another big test

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




Since the market's short term failure two trading weeks ago, our downside target has been a serious test of the July 14th lows at or near $120.02. Considering the significant trend line that exists just below this mark it shouldn't be a surprise to see the market shoot past the 120 level and bounce off the trend line (blue line above). Short term traders ought to consider covering short positions should we trade down to this level.

Regardless, over the medium term, the market continues to forge lower lows and lower highs suggesting we are still very comfortably contained within a bear market. That posture will change with a close above $132 on a weekly basis and a cross of the 13 EMA and the 30 SMA. That is asking quite a bit for this market, but hay even a market technician can dream!

Speaking of moving averages; for those looking to add a timing tool to their investing tool kit, try adding the 13 EMA and 30 SMA as shown above. Notice how they crossed way back in November of 2007. If you followed this one tool, you would have been avoided much of the past year's misery in the stock market. While no technical tool works all of the time, this one tool helps in making sure you are not caught on the wrong side of the market. Try it out and I am sure you will be pleased with its results.


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

Uptrend failed, look for test of summer lows

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



As European growth expectations come into questions, the broader US stock market (as measured by the S&P 500 depository receipts - SPY) also suggests poor economic times ahead. If you believe the stock market is the ultimate leading indicator of an economy then the performance of the SPY suggests the US has been comfortably within a recession for the six months. Japan is showing negative quarterly growth, Europe seems to be tipping over, and the US is already in a bear market. Looks like tough times ahead for equity investors.

From a stricly short term perspective, markets love to put in lows in the late 3rd quarter. September & October too are generally the worst performing months for equities. Couple the expected seasonal performance with poor economic expectations and add in a little international tension (thanks Russia!) and we have the makings for further price declines for the forseable future.

Technically speaking, one ought to expect a test of the summer lows at or near $120 on the SPY over the coming weeks. Should that level be broken then we must revise our downside targets accordingly.

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

Short term uptrend under attack

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



As Labor Day approaches, the summer doldrums are almost over for another year. Junior stocks are usually hit the hardest during this seasonally weak time of year - and this year has been no exception. With regard to the broader market, as the diagram above suggests, we are still very well contained within a massive downward pointing channel that has been in place for the past nine months. Using the moving averages above, we can clearly see the SPY entered its bear phase last November (when the 13 week EMA crossed below the 30 week SMA). For simplicity, we will not get an outright 'buy' signal until the 13 week EMA crosses back above the 30 week SMA. As well, normal consolidations take 18 months to play out so I am not expecting too much out of the US stock market (and most world equity markets for that matter) for the next six months at the least.

Currently we are consolidating a 'dead-cat-bounce'. From the extreme lows seen in July, we have rallied back to the 50% level ($131.80) and have not done much since. Should the short term upward pointing channel (small blue lines) be broken, one ought to expect a test of the lows seen in July (A.). Should we consolidate and break higher, resistance should come in at the major downtrend line (B.).

That's all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

A key point in the recent rally

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



This is an important point in the life of the recent rally seen in the stock market. As the chart above details, we have made the 'technical' bounce off the extreme low seen in July (that was the easy part). For this bottom to be real, we will now have to see if the recent lows can hold during a serious retest. At best we may establish a nice consolidation for the next few weeks in an around these levels. My hunch though (considering the rhetoric coming out of Moscow and the poor economic data from across the world) is we will retest the lows seen in July. On a final note, one ought to respect the fact that we are still very comfortably within a long term downward pointing channel. Where resistance to that trend is represented by the blue arrow in the chart above and support is represented by the red arrow.
Better get out that old Beta copy of Wolverines.......The Russians are coming, the Russians are coming!
That's all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com

Daily bottom comes in at bottom of weekly channel

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



The long awaited Beijing Olympics have begun. The trends we have talked about over the past four to six years in many commodities look to be changing as the 'build-out' of the Chinese economy has hit its zenith. The Chinesse consider 08/08/2008 to be a very signficant date and I am starting to believe it too! Could this be the pivot point for the commodity markets? From a short term perspective, not less than 13 new commodity trends establish themselves this past week (please refer to WCTS posted at http://www.the-rational-investor.ocm/WCTS080808.pdf).

One result, the S&P 500 index looks to have bottomed amid the commodity market meltdown. On cautionary note - commodity prices themselves are very volatile. After these markets settle down, one ought to expect some sort of test of the old highs. As well, most bottoms require a retest of the initial low. Looking at the chart above one can see how the SPY rallied sharply from its recent lows at $120. When the commodities retest their recent highs I will be expecting a test of the $120.02 area again on the SPY - but hey lets enjoy the rally while it lasts.
We have hit the short term 50% level and are flirting with the fast moving average at $130, should we consolidate and then break higher, one ought to expect a test of the medium term bear market trend channel at or near $140.00....

Enjoy the bounce while it lasts. That's all for this week,

Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com