The Big Picture for the Week of May 30, 2010

It appears as though things are getting a little dicier in the market. Emotion is clearly elevated as indicated by the now, but probably only temporary, ability of the market to have huge swings in a given day or big moves in one just one direction for a day.

My thought along these lines has been that these exaggerated moves are signs of a fragile market. Fragile does not have to mean that it will implode or even go down in a meaningful way from here, maybe a run down to the low we’ve hit twice recently will do it but of course we don’t know at this point.

For now the 200 DMA still looks important. The huge, I tweeted it was a panic, rally on Thursday stopped about a point under the 200 DMA, one point. Friday was obviously a down day and the S&P 500 is currently about 15 or 16 points below the indicator. From having one eye on CNBC it seems like most of the TV guests view this as a correction in a bull market while more people in print view the rally from a year ago March as a bear market rally or what I like to call a feel good rally.

Throughout I have been saying that the worst financial crisis in 80 years won’t wrap up in 18 months and that at some point there would be a another decline that would scare the hell out of people. Whether the low for the current move is in or not, an emotion fueled, fast run back to 1200 will not be the end of it. In my opinion the best thing would be a slow move off of the low with a year or two of single digit gains. Should it play out that way the US may not be a world beating investment destination (I don’t think it will be) but the chance for another run to SPX 700 would then be an incredibly remote possibility instead of what I think now is merely a low probability.

Times like now are much easier to navigate with a predetermined and simple strategy.

6 Comments

  1. Mike C.,
    sorry I could not respont two days ago. I went to bed, here in Italy was very late and the next day I applied your 50 Day Breach into stock excel program. Very good indicator. THANKS – So when I run excel I cannot leave a comment on this blog. Regarding those S&P Points I have allready mentioned where how I got whose. I looked at the ritzholt link and they did the same except they also used head and shoulders, but I do not use head and shoulders. The first S&P points was 1008,37. Well, 1040 is very close. However this correction in my opinion should go further down because it is a correction from the big move in march/09. Yes we have corrected in july/09 and in jan/09 but some of the excess must be taken out. As you can see we now have sovereign dept problems. What does it mean – for many countries in italy some austerity measures – even germany has adopted such in some form to go along with the rest of europe. Consumers will not spend as much.
    My feeling is that once this excess is taken out we will resume the upward move. I am not sure from what pointy 1008, 943 or 877. I think that 943 lookes the most likely. However S&P will go up to maybe to 1130 ( 180/2=90 +1040=1130) and then 1130-180=950. Close to 943. – Mike, I hope I have been very clear. Thanks for your indicator again. Jeff from Milan, Italy

    Seg,
    well you just got too excited about this bull market. It happens. I am on the same camp as you that this is not the end of this bull. But, as you can see the markets do what ever they want and we do not have any control even if we interject our openions. Actually I want to write less, since what I say matters little.
    I still like to know about your monetary system.
    Tx,
    Jeff from Milan Italy

    Reply
  2. How should one look at the fact that the Nasdaq is above its 200dma (along with other sectors that have led the rally like consumer discretionary – XRT).

    Are they expected to capitulate last or is it a divergence that should be looked at positively?

    Reply
  3. “well you just got too excited about this bull market. It happens.”

    We will see. I do not view it as to excited. I have a long term view which is rather negative. I have an intermediate term view that we are in a bull market. I try to limit my short term actions as they are prone to more error. I still view this as a short term correction in a bull market.

    SEG

    Reply
  4. I definitely agree that this crisis won’t work out of the system in 18 months because our government will choose the slow hard road instead of the fast hard road to creative destruction.

    I think that the SPX will basically be right where it is today in 2019, though in inflation adjusted terms it will be far lower.

    I think that it is inevitable that the SPX will fall through 700 in the 2013-14 time frame. But like I shared yesterday I think that we will see 1400-1500 in the 1-2 year time frame before we plunge again.

    In the short term I don’t know what the SPX is going to do, but I see strength in Gold and the Yen so I’ll invest there instead. But like Jeff says: what we think or say will happen doesn’t much matter 😉

    Reply
  5. I tend to think Mathew’s forecast for the S&P is similar to mine, except I am concerned it may not reach 1400. Of course I am also concerned it will hit 1550.

    We will just have to wait and see.

    Reply
  6. JB,
    I am not a market expert but I think it is a positive divergence. If we start picking up from here, it would be ok. I think(would like) that the market goes up to 1130 and then make another 180 S&P correction from 1130. NOTICE – LIKE.
    But let me tell you a little secret, I have an indicator that through the corrections 07/2009 and 01-02/2010 never corrected and this time – it has not yet corrected.
    Another key to the puzzel – I have a program that when you back test it signaled a top on july/2007 and sept/2007 way before the capitultion. It has not yet given any signal of a top. This is a correction – bigger than 10%, maybe 20% or 30%.
    Must now go to sleep.
    Best,
    Jeff from Milan, Italy

    Reply

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing

The Big Picture for the Week of May 30, 2010

It appears as though things are getting a little dicier in the market. Emotion is clearly elevated as indicated by the now, but probably only temporary, ability of the market to have huge swings in a given day or big moves in one just one direction for a day.

My thought along these lines has been that these exaggerated moves are signs of a fragile market. Fragile does not have to mean that it will implode or even go down in a meaningful way from here, maybe a run down to the low we’ve hit twice recently will do it but of course we don’t know at this point.

For now the 200 DMA still looks important. The huge, I tweeted it was a panic, rally on Thursday stopped about a point under the 200 DMA, one point. Friday was obviously a down day and the S&P 500 is currently about 15 or 16 points below the indicator. From having one eye on CNBC it seems like most of the TV guests view this as a correction in a bull market while more people in print view the rally from a year ago March as a bear market rally or what I like to call a feel good rally.

Throughout I have been saying that the worst financial crisis in 80 years won’t wrap up in 18 months and that at some point there would be a another decline that would scare the hell out of people. Whether the low for the current move is in or not, an emotion fueled, fast run back to 1200 will not be the end of it. In my opinion the best thing would be a slow move off of the low with a year or two of single digit gains. Should it play out that way the US may not be a world beating investment destination (I don’t think it will be) but the chance for another run to SPX 700 would then be an incredibly remote possibility instead of what I think now is merely a low probability.

Times like now are much easier to navigate with a predetermined and simple strategy.

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing