Here comes another Big Test

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



One might say the honeymoon is now officially over!

After a month of love over the new US President partisan politics have once again taken over Washington. As a result, we have now come to the first big test of the new Obama administration.

On concerns about over spending (of all thing!) the recently proposed 'stimulus' package has now come in doubt. As the current bill has been delayed in the US Senate, equity prices (and specifically bank stocks) have fallen. Should the market believe the package will fail to meet its' needs prices will break support (currently near $80) and a new sell signal will be established for the US equity markets.

The true irony of this situation is the fact that the now 'fiscally conservative' Republican party are the same politicians that saw the total US debt more than double over the course of the Jr. Bush years. Now the remaining Republicans in the US Congress have abandoned the new President - suggesting that his proposals are nothing more than waist-full spending, how pathetic! Remember too, not a single Confederate state voted for Obama last Novemeber, who say's race isn't an issue any more......

I'll get off the soap box now.

Summary: Short term traders may look to play a break of the recent trading range (as noted on the chart above). Investers have no business even looking at the stock market now.

That's all for this week,

Brian Beamish FCSI

the_rational_investor@yahoo.com

the-rational-investor.com

The Bottoming Process Grinds On

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



The short term bottom we thought was in the market last post has been broken. While we know the medium term trend remains down and shall be so until the 13 EMA crosses back above the 30 SMA, there were indications we might get a rally into the Obama inauguration (Jan 20th). The January Options expiry proved to be too much supply and the little uptrend that was in place was indeed broken. Notice too that the market rallied up to the 13 EMA and then backed off [Technician's note: This is a great little timing tool on its own as well]. Should we put in any type of top over the coming weeks it shall suggest the lows of the fall will need to be tested in earnest.

We are once again left sitting on the sidelines for the time being. As previously stated, medium & long term investors have no business even looking at the stock market yet, but traders shall (at some point) be given an entry point on a long trade that I believe will ultimatly take us back to the 50% level (near 113). Considering the seasonality, I wouldn't be surprised if that occurs some time into the spring. Unfortunaly, that trade isn't here yet, so once again we are left to sit on cash and watch the fireworks.

That's all for this week,

Brian Beamish FCSI

the_rational_investor@yahoo.com

the-rational-investor.com

A Bull run amid a Bear trend

Hi there, and welcome back to RI's S&P 500 blog.
Hope all had a good Christmas and a happy new years

Now on to the market!


After months of enduring one sell signal after another, we can finally call a bull trading signal and suggest traders ought to take the appropriate stance. Considering the seasonality, the poor investor sentiment and the anticipation of a new stronger leadership (along with billions of dollars of stimulus) one should not be surprised to see a tradable bottom come in.

Having said that, this can only be viewed as a short term bullish signal, the medium term down trend is very well in place and a rally in the short term shall only take us back into the actual down trend channel. As well, the lows of fall ($73.74) were never really tested in earnest leading me to believe this level will need to be retested again in the future. It may take months, maybe even years, but this level shall be tested again.

With the market (and the SPY in particular) closing above the previously stated upper trading range mark ($92.38) the market confirmed a short term bull flag formation and now has an initial upside price object of $103.44. Coincidentally, we have the gap from September to be filled near this level, and the bottom of the down trend channel rests near this level as well. Adding to the bullish case, the bearish spread between the 13EMA and the 30SMA is very wide and while this in itself isn't a reason for the market to move higher, this relationship should come back into normal levels. And lastly, the steep down trend channel in place since the gap lower in September has been broken and now represents support rather than resistance. Again, this in itself doesn't suggest higher prices, butit does suggest support should the market need to pull back.

Put it all together and I think we have something quit normal. Seasonality, sentiment and short term euphoria are all contributing to an oversold rally within a long term bear market. For those that make a living from the stock market, make your money now because once the rally is over, we will probably head right back into doing nothing.

That's all for this week,

Brian Beamish FCSI

the_rational_investor@yahoo.com

the-rational-investor.com

Bear market grinds on

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





Now well over a year old, this bear market has erased almost half the value of the S&P 500 Stock index. What seemed like a simple sell signal (when the 13 EMA crossed below the 30 SMA in November of 2007) now looks like a significant pivot point in contemporary economic history.

This week, like so many of the recent past, is clouded with poor economic data and the potential for more US corporate bankrupcies. Couple this with significant job losses and its no surprise the christmas of 2008 won't be too jolly (especially on Wall Street!). Ironically enough, this is the sentiment one needs to see in order to 'put a bottom in' the stock market. The bad news is now priced into stocks and as prices suggest things are indeed bad. However, as a leading indicator, it shall be the first thing to turn up when the economy is precieved to have hit bottom. We of course shall be well aware of that potential turn as the charts often give an indication of such a turn well in advance. Using the 13EMA/30SMA cross over system is one such example.

In the short term, for the past five weeks the market has been contained within a trading range where 74.34 represents the bottom and 92.38 represents the top. Considering today is the US Fed. Reserve Meeting for December and this Friday is the December Options expiry, I wouldn't put alot of confidence in the market being where it is today come Monday or Tuesday of next week. Regardless, should the market close above or below either of these range points, the appropriate short term action should be taken.

Technically speaking, there is no bottom in the market yet. The market is now well contained within two bearish price chanels. This suggests that prices need to fall further and that any rallies should be viewed with skepticism until these chanels are broken. There is a valid bearish flag pole working which suggests prices need to hit 54.48. And until either of these events happen, one ought to sit on the sidelines and watch the economic fireworks from a comfortable cash position.



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

Consolidating a new lower trading range

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



What more can be said that hasn't already. Short term traders are short from 83.58 with stops above recent highs at or just above 90.13. Those short should be looking for the ultimate selloff down to the bear flag target at or near 54.48.

Medium to long term investors have no business even looking at the stock market right now. Yes a seasonal bottom should be coming in but my fear is that will not be realized until well into the new year.

My short term expectations are for a test of the recent lows as we head into the December options expiry (Dec 19th) after that we ought to see a typical 'santa claus' rally into the X-mass/New Year's holiday period. Because New years falls on a Wed. this year. I wouldn't expect the selling to begin in earnest again until the second week of January.


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

And the bear goes on

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

The recent breakdown of the S&P 500 stock index through its October lows suggests there is further price declines ahead.

For traders, an outright sell signal was registered two weeks ago when the market moved below the important low of $83.58. One should be short from this level with corresponding stops just above the recent high (the day of the US Presidential election) at or near $100.86. As the chart above illustrates, we sold off tramatically into the November Options expiry last Thursday November 21st. And while that represented a nice profit on the short trade, we have neither hit the bottom of the current trend channel nor have we hit the bear flag target. This suggests that once the market has found buyers again we ought to see a serious test of that low (at best) and a punch through those lows (at worst).

For investors, there is no sign of a bottom anywhere in sight so one ought to sit on the sidelines and watch for the time being (once again!).

Considering the substantial bearish sentiment and where we are in the seasonal cycle, some sort of bottom should come in over the coming weeks/months. As a side note, the bear market of 1973-1974 saw the Dow finish the year at or near its lows in 1974 (only to reverse violently in early January 1975) so a similar performance shouldn't be too surprising. We are at about the same point in the 'fear' cycle (roughtly the 8th year of an expected 17 year cycle) as 1974 and the prospects of some sort of recovery now seem to hinge on the new Democratic President, Obama, and what his 'change' platform will produce. George Bush is a lame duck and shall ride out his remaining month and a half in office as nothing more than a spectator.

That's all for this week,

Brian Beamish FCSI

the_rational_investor@yahoo.com

the-rational-investor.com

The test came and failed again

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







For a few weeks now we have been watching the market trade in a well established channel between a high just under $100.00 and a low near $83.58. The market popped up above the high end of the range just before the US Presidential election and then ( just as one was starting to feel a little bit more optimistic about things) the market broke straight down to take out the important low at $83.58 just last week.


For the Bulls, the fact that the lows were taken out means we must start the construction of a new bottom all over again. So going forward, we shall use the lows of last week as our new bottom of the trading range $82.09. We ought to see a nice rally away from the lows then a test of this low and then a turn back up above the rally peak before we can get a buy signal. All this says to me is that we probably won't get a seasonal bounce in the market until well into December. Novemeber options expiry is coming up this Friday 21st and the market ought to remain skiddish into that.


For those agressive bears, the break of $83.58 represents a new intermediate sell signal, with your associated stops just above the pre-election peak of $100.86. This is indeed a monsterous bear flag pole formation which suggests prices need to come down to the $54.50 area! [(129.96-83.58)-100.86]. Ouch!



In summary then, new weekly sell signal suggests recent potential bottom has gone away. Bulls should remain on the sidelines while bears can play (what I consider to be high risk) the short trade with an equally aggressive short target of $54.50.



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