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Saturday, May 09, 2009 6:29:36 PM
Amateur Investors Weekend Stock Market Analysis (5/9/09)
http://www.amateur-investor.net/Weekend_Market_Analysis_May_9_09.htm
Overall over the next several months we have two potential scenario's that may play out into the end of the year. I will start with the Bullish scenario first to make everyone happy. The bullish scenario is that the major averages are going through a longer term corrective ABC type rally after completing a 5 Wave pattern to the downside which ended with the lows in early March. Currently the major averages are nearing completion of the "A" Wave up which will then be followed by a "B" Wave pullback before Wave "C" up occurs.
A chart of the Dow shows the B Wave could potentially pullback to around the 7450 area which would then be followed by the "C" Wave up to either the 9400 level which is the 38.2% Retrace from the October 2007 high to the March 2009 low or as high as the 50% Retrace which is at 10400.
As for the Nasdaq if we see a "B" Wave develop soon look for a possible pullback to around 1500 or so which would then be followed by Wave "C" either up to the 38.2% Retrace near 1890 or the 50% Retrace around 2045.
Meanwhile as for the S&P 500 if we begin to see a Wave "B" pullback look for a potential drop back to the mid to upper 700s before Wave "C" up begins. The potential target prices for Wave "C" would either be at the 38.2% Retrace near 1014 or potentially as high as the 50% Retrace near 1120.
Now there are always two sides to every story so now we will look at a more more Bearish scenario. The bearish scenario assumes that the March 6th lows were only the end of Wave 3 (5) and not Wave 5 (5) like most believe and that the latest rally is Wave 4 (5) which will then be followed by Wave 5 (5) and lower Lows at some point.
Although I currently favor the Bullish scenario we can't completely ignore the Bearish scenario either as unforeseen world events could quickly change market dynamics. I know many investors are frustrated they missed the initial move off the early March lows however keep in mind if the "C" Wave does occur after a "B" Wave pullback it may end up being just as powerful as the current "A" Wave.
Finally keep in mind there is no guarantee that the major averages will just keep zooming higher over the next 3 to 5 years like occurred from late 2002 through late 2007. Remember we could go through a similar pattern like Japan has seen during the past 20 years. After the Nikkei 225 had its big run in the 1980's this was followed by a 59% drop from late 1989 through the middle part of 1992 (points D to E) which is very similar to what occurred in our market. This was then followed by a sharp 47% rally (points E to F) which was then followed by a series of choppy upward and downward moves from mid 1993 through mid 1996 in which the Nikkei 225 gained +35% and +54% and lost -26% and -34%.
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%.
Our Spring Membership Special for new Members is shown below
which are 50% Off our normal Monthly Rate of $39.95
http://www.amateur-investor.net/Weekend_Market_Analysis_May_9_09.htm
Overall over the next several months we have two potential scenario's that may play out into the end of the year. I will start with the Bullish scenario first to make everyone happy. The bullish scenario is that the major averages are going through a longer term corrective ABC type rally after completing a 5 Wave pattern to the downside which ended with the lows in early March. Currently the major averages are nearing completion of the "A" Wave up which will then be followed by a "B" Wave pullback before Wave "C" up occurs.
A chart of the Dow shows the B Wave could potentially pullback to around the 7450 area which would then be followed by the "C" Wave up to either the 9400 level which is the 38.2% Retrace from the October 2007 high to the March 2009 low or as high as the 50% Retrace which is at 10400.
As for the Nasdaq if we see a "B" Wave develop soon look for a possible pullback to around 1500 or so which would then be followed by Wave "C" either up to the 38.2% Retrace near 1890 or the 50% Retrace around 2045.
Meanwhile as for the S&P 500 if we begin to see a Wave "B" pullback look for a potential drop back to the mid to upper 700s before Wave "C" up begins. The potential target prices for Wave "C" would either be at the 38.2% Retrace near 1014 or potentially as high as the 50% Retrace near 1120.
Now there are always two sides to every story so now we will look at a more more Bearish scenario. The bearish scenario assumes that the March 6th lows were only the end of Wave 3 (5) and not Wave 5 (5) like most believe and that the latest rally is Wave 4 (5) which will then be followed by Wave 5 (5) and lower Lows at some point.
Although I currently favor the Bullish scenario we can't completely ignore the Bearish scenario either as unforeseen world events could quickly change market dynamics. I know many investors are frustrated they missed the initial move off the early March lows however keep in mind if the "C" Wave does occur after a "B" Wave pullback it may end up being just as powerful as the current "A" Wave.
Finally keep in mind there is no guarantee that the major averages will just keep zooming higher over the next 3 to 5 years like occurred from late 2002 through late 2007. Remember we could go through a similar pattern like Japan has seen during the past 20 years. After the Nikkei 225 had its big run in the 1980's this was followed by a 59% drop from late 1989 through the middle part of 1992 (points D to E) which is very similar to what occurred in our market. This was then followed by a sharp 47% rally (points E to F) which was then followed by a series of choppy upward and downward moves from mid 1993 through mid 1996 in which the Nikkei 225 gained +35% and +54% and lost -26% and -34%.
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%.
Our Spring Membership Special for new Members is shown below
which are 50% Off our normal Monthly Rate of $39.95
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