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Monday, May 25, 2009 9:57:18 PM
Amateur Investors Weekend Stock Market Analysis (5/23/09)
http://www.amateur-investor.net/Weekend_Market_Analysis_May_23_09.htm
Right now we have two camps as far as where the market is in relation to Elliott Wave Analysis. The Bullish Camp believes Primary 1 completed on March 6 at 667 in the S&P 500 which has been followed by an A Wave of a corrective ABC type rally which may have completed at the 930 level on May 6th.
An example of a classical looking 5 Wave pattern is shown below which is typically followed by an ABC type rally.
If this is what we are seeing then we may be seeing the initial stages Wave B which could retrace anywhere from 38.2% to 61.8% of the A Wave which was 263 points. A 38.2% Retrace would yield a value of 830 (a), 50% Retrace around 800 (b) while a 61.8% Retrace would be at 767 (c). This type of pattern would eventually lead to the development of an Inverted Head and Shoulders pattern as Wave B would make a higher Low similar to what occurred in late 2002 and early 2003.
Once the B Wave ends then this would be followed by an C Wave rally possibly up to the 1014 to 1120 range with 1014 being the 38.2% Retrace from 1576 to 667 while 1120 is the 50% Retrace. The most Bullish Scenario would be for an eventual rise up to the 61.8% Retrace which is at 1229.
Notice in late 2002 and early 2003 the S&P 500 formed an Inverted Head and Shoulders pattern which was followed by an impressive Wave C rally through early 2004. If the Bullish Scenario is going to occur I believe the S&P 500 must not drop below the 741 level which was the low made last November and is acting as the 1st Shoulder
Meanwhile the Bearish Camp believes the low on March 6th was then end of Wave 3 (5) of Primary 1 and not Wave 5 (5) which has been followed by Wave 4 (5). If that is the case then this will be followed by Wave 5 (5) with the March 6th low eventually being taken out in the longer term.
Keep in mind back in 2001 and the early part of 2002 it looked like the S&P 500 had formed a favorable Inverted Head and Shoulders pattern but the C Wave truncated near the peak of Wave A which led to a false breakout and eventually lower Lows. Thus this is something to be on the lookout for in the coming weeks if the Bearish Scenario is going to develop.
Also even if the more Bearish Scenario were to develop it's possible the S&P 500 wouldn't drop much below the previous March 6th low of 667. A long term chart of the S&P 500 shows that there is a major support area in the lower 600's which coincides with with the 61.8% Retracement Levels calculated from the 1974 Bear Market Low and 1932 Bear Market Low which I have highlighted by a solid red line. Also the longer term upward trend line (blue line) connecting the 1942, 1974 and 1982 Lows comes into play in the lower 600's as well so this appears to be a major support level for the S&P 500.
Finally keep your eye on Gold as the GLD ETF may give us a clue to future longer term direction for the market. During the past few years the GLD and S&P 500 have generally trended in opposite directions such that rallies in the GLD (points E to F) have led to sell offs in the S&P 500 (points G to H) and vice versa.
Also notice the GLD is exhibiting a potential Inverted Head and Shoulders pattern with the Neckline in the upper 90's which may act as resistance if the GLD continues higher over the next 2 to 4 weeks. What transpires around the Neckline may tell us a lot about the long term prospects for the major averages. If the GLD were to rise strongly above the Neckline it could eventually rally up to the 115 to 120 area in the long term which would likely have negative implications for the major averages leading to the Bearish Scenario I talked about above. On the other hand if the GLD were to stall out in the upper 90's and then sell off then that would likely favor the more Bullish Scenario as mentioned above for the longer term. Thus I would keep a very close eye on Gold in the coming weeks.
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 Summer 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_23_09.htm
Right now we have two camps as far as where the market is in relation to Elliott Wave Analysis. The Bullish Camp believes Primary 1 completed on March 6 at 667 in the S&P 500 which has been followed by an A Wave of a corrective ABC type rally which may have completed at the 930 level on May 6th.
An example of a classical looking 5 Wave pattern is shown below which is typically followed by an ABC type rally.
If this is what we are seeing then we may be seeing the initial stages Wave B which could retrace anywhere from 38.2% to 61.8% of the A Wave which was 263 points. A 38.2% Retrace would yield a value of 830 (a), 50% Retrace around 800 (b) while a 61.8% Retrace would be at 767 (c). This type of pattern would eventually lead to the development of an Inverted Head and Shoulders pattern as Wave B would make a higher Low similar to what occurred in late 2002 and early 2003.
Once the B Wave ends then this would be followed by an C Wave rally possibly up to the 1014 to 1120 range with 1014 being the 38.2% Retrace from 1576 to 667 while 1120 is the 50% Retrace. The most Bullish Scenario would be for an eventual rise up to the 61.8% Retrace which is at 1229.
Notice in late 2002 and early 2003 the S&P 500 formed an Inverted Head and Shoulders pattern which was followed by an impressive Wave C rally through early 2004. If the Bullish Scenario is going to occur I believe the S&P 500 must not drop below the 741 level which was the low made last November and is acting as the 1st Shoulder
Meanwhile the Bearish Camp believes the low on March 6th was then end of Wave 3 (5) of Primary 1 and not Wave 5 (5) which has been followed by Wave 4 (5). If that is the case then this will be followed by Wave 5 (5) with the March 6th low eventually being taken out in the longer term.
Keep in mind back in 2001 and the early part of 2002 it looked like the S&P 500 had formed a favorable Inverted Head and Shoulders pattern but the C Wave truncated near the peak of Wave A which led to a false breakout and eventually lower Lows. Thus this is something to be on the lookout for in the coming weeks if the Bearish Scenario is going to develop.
Also even if the more Bearish Scenario were to develop it's possible the S&P 500 wouldn't drop much below the previous March 6th low of 667. A long term chart of the S&P 500 shows that there is a major support area in the lower 600's which coincides with with the 61.8% Retracement Levels calculated from the 1974 Bear Market Low and 1932 Bear Market Low which I have highlighted by a solid red line. Also the longer term upward trend line (blue line) connecting the 1942, 1974 and 1982 Lows comes into play in the lower 600's as well so this appears to be a major support level for the S&P 500.
Finally keep your eye on Gold as the GLD ETF may give us a clue to future longer term direction for the market. During the past few years the GLD and S&P 500 have generally trended in opposite directions such that rallies in the GLD (points E to F) have led to sell offs in the S&P 500 (points G to H) and vice versa.
Also notice the GLD is exhibiting a potential Inverted Head and Shoulders pattern with the Neckline in the upper 90's which may act as resistance if the GLD continues higher over the next 2 to 4 weeks. What transpires around the Neckline may tell us a lot about the long term prospects for the major averages. If the GLD were to rise strongly above the Neckline it could eventually rally up to the 115 to 120 area in the long term which would likely have negative implications for the major averages leading to the Bearish Scenario I talked about above. On the other hand if the GLD were to stall out in the upper 90's and then sell off then that would likely favor the more Bullish Scenario as mentioned above for the longer term. Thus I would keep a very close eye on Gold in the coming weeks.
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 Summer Membership Special for new Members is shown below
which are 50% Off our normal Monthly Rate of $39.95
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