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Sunday, April 26, 2009 1:07:31 PM
Amateur Investors Weekend Stock Market Analysis (4/25/09)
http://www.amateur-investor.net/Weekend_Market_Analysis_April_25_09.htm
This was interesting week as the major averages dropped substantially on Monday and then wedged their way higher the rest of the week. The S&P 500 continues to bounce off its 20 Day EMA (blue line) and the bottom of its upward channel as investors keep buying every dip. Also notice the S&P 500 hasn't had more than "2" down days in a row since the March 6th bottom.
The question for next week is will the S&P 500 rise above the 876 level and rise up to the top of its channel in the lower 890's (point A) or will it stall out below the 876 level and reverse to the downside and retest the 20 Day EMA and bottom of the rising channel near 835 (point B) and actually drop below it to trap all of those who have been buying every dip of late.
Meanwhile a few things that should be watched closely next week are the Volatility Index (VIX) and the Put to Call Ratio. On a weekly scale the VIX has tested the bottom of its -2.0 Bollinger Band the last two weeks which is similar to what occurred back in May of 2008 (point C). This was followed by a rise back to the top of its +2.0 Bollinger Band over the next 8 weeks (points C to D) in which the S&P 500 dropped 17% (points E to F) after rising the previous 9 weeks. Keep in mind I don't think the S&P 500 will drop 17% from its current level however an 8% to 10% drop is not out of the question.
Furthermore if we look at an intra day chart of the VIX the past several days notice it's developing a Triangle pattern and setting up to make a big move in one direction or the other. Considering how oversold the VIX is I would be leaning towards a potential breakout to the upside.
Meanwhile if we look at a daily chart of the 5 Day Average of the Put to Call Ratio it has remained well below the 1.0 level (green line) for a considerably period of time and is also developing a Triangle pattern which means a big move is coming. Considering the overall patterns in the VIX and Put to Call Ratio it looks like they may breakout to the upside before much longer which would lead to a more substantial correction in the market than we have seen since the March 6th lows.
Finally as I mentioned last weekend the chart of the Dow looks similar to the 1938 time period as it went through a quick pullback (points 1 to a) after rallying 25% in 3 weeks which was then followed by a sharp 2 1/2 day rally in which the Dow gained 7% (points a to b). This was then followed by a more substantial pullback in which the Dow lost 8% over a period of 5 days (points b to c).
A current chart of the Dow shows a potential similar pattern developing although on a somewhat longer timeframe. The Dow gained 26.7% over a 6 week period which was followed by a quick 5% drop (points 1 to a) early this week. This has been followed by a 4% rally since the low made on Tuesday (points a to b). If the 1938 pattern is repeating itself then next week we could see a pullback occur.
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2007 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
http://www.amateur-investor.net/Weekend_Market_Analysis_April_25_09.htm
This was interesting week as the major averages dropped substantially on Monday and then wedged their way higher the rest of the week. The S&P 500 continues to bounce off its 20 Day EMA (blue line) and the bottom of its upward channel as investors keep buying every dip. Also notice the S&P 500 hasn't had more than "2" down days in a row since the March 6th bottom.
The question for next week is will the S&P 500 rise above the 876 level and rise up to the top of its channel in the lower 890's (point A) or will it stall out below the 876 level and reverse to the downside and retest the 20 Day EMA and bottom of the rising channel near 835 (point B) and actually drop below it to trap all of those who have been buying every dip of late.
Meanwhile a few things that should be watched closely next week are the Volatility Index (VIX) and the Put to Call Ratio. On a weekly scale the VIX has tested the bottom of its -2.0 Bollinger Band the last two weeks which is similar to what occurred back in May of 2008 (point C). This was followed by a rise back to the top of its +2.0 Bollinger Band over the next 8 weeks (points C to D) in which the S&P 500 dropped 17% (points E to F) after rising the previous 9 weeks. Keep in mind I don't think the S&P 500 will drop 17% from its current level however an 8% to 10% drop is not out of the question.
Furthermore if we look at an intra day chart of the VIX the past several days notice it's developing a Triangle pattern and setting up to make a big move in one direction or the other. Considering how oversold the VIX is I would be leaning towards a potential breakout to the upside.
Meanwhile if we look at a daily chart of the 5 Day Average of the Put to Call Ratio it has remained well below the 1.0 level (green line) for a considerably period of time and is also developing a Triangle pattern which means a big move is coming. Considering the overall patterns in the VIX and Put to Call Ratio it looks like they may breakout to the upside before much longer which would lead to a more substantial correction in the market than we have seen since the March 6th lows.
Finally as I mentioned last weekend the chart of the Dow looks similar to the 1938 time period as it went through a quick pullback (points 1 to a) after rallying 25% in 3 weeks which was then followed by a sharp 2 1/2 day rally in which the Dow gained 7% (points a to b). This was then followed by a more substantial pullback in which the Dow lost 8% over a period of 5 days (points b to c).
A current chart of the Dow shows a potential similar pattern developing although on a somewhat longer timeframe. The Dow gained 26.7% over a 6 week period which was followed by a quick 5% drop (points 1 to a) early this week. This has been followed by a 4% rally since the low made on Tuesday (points a to b). If the 1938 pattern is repeating itself then next week we could see a pullback occur.
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2007 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
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