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Sunday, October 25, 2009 11:56:58 AM
Amateur Investors Weekend Stock Market Analysis (10/24/09)
http://www.amateur-investor.net/Weekend_Market_Analysis_Oct_24_09.htm
I'm just going to mention a few random thoughts this weekend. First the chart of the Nasdaq 100 looks very similar to that of the Dow from the 1920's through the late 1930's. Notice in late 1938 the Dow stalled out near its 61.8% Retrace (point A) calculated from the early 1937 high to the early 1938 low after rallying strongly from March of 1938 through October of 1938. Currently the Nasdaq 100 has now reached its 61.8% Retrace (point B) calculated from the October 2007 high to the November 2008 low. Once the Dow reached its 61.8% Retrace in late 1938 this was then followed by a sharp pullback (points A to C) before another retest occurred in late 1939 (points C to D) which was followed by a gradual decline though early 1942 (points D to E).
Meanwhile another thing I keep hearing is that the US will not repeat the same mistakes Japan did in the 1990's with regards to their economy which has been followed by a 20 Year Secular Bear Market that began in late 1989. Thus it's certainly not totally impossible the US Market could suffer an extended Secular Bear Market as well. Notice the Nikkei 225 has had some significant Bear Market rallies the last 20 years but the overall trend has been for lower Lows.
As far as the near term the S&P 500 so far hasn't been able to rally back to its next key resistance area near 1121 which corresponds to its 50% Retrace (green line) calculated from the October 2007 high to the March 2009 low. In addition the longer term downward trend line (black line) also comes into play near 1121 as well. Meanwhile as you can see the S&P 500 has been holding support along its upward trend line from the March low (blue line) as it traces out an ABC corrective rally. Once this trend line is broken then that may signal a change in longer term direction.
Meanwhile for those that believe the next major Bull Market has begun watch the 200 Month EMA (blue line) as that will be a key support area in the months ahead. When the S&P 500 made a bottom in late 1974 and eventually rallied back above its 200 Month EMA it was able to hold support at or above it (points D) for the next several years. Furthermore also notice when the S&P 500 bottomed in late 2002 (point E) it found support right at its 200 Month EMA as well. Currently the 200 Month EMA in the S&P 500 is just above the 1000 level.
Finally I haven't talked about the 5 Day Average of the Put to Call Ratio in awhile however notice how it has changed in 2009 from the previous 2 years. In 2007 and 2008 significant oversold rallies occurred (points F to G) after the 5 Day Average of the Put to Call Ratio rose above 1.15 (points H). However in 2009 the 5 Day Average of the Put to Call Ratio has only been rising just above the 1.0 level (points I) before signaling a nearing oversold rally (points F to G). Thus the question is will this recent trend continue during the next several months or will we see an eventual transition back to higher readings in the future?
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to the following products.
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's and SPY's.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account.
3. The "End of Month Strategy". 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.
http://www.amateur-investor.net/Weekend_Market_Analysis_Oct_24_09.htm
I'm just going to mention a few random thoughts this weekend. First the chart of the Nasdaq 100 looks very similar to that of the Dow from the 1920's through the late 1930's. Notice in late 1938 the Dow stalled out near its 61.8% Retrace (point A) calculated from the early 1937 high to the early 1938 low after rallying strongly from March of 1938 through October of 1938. Currently the Nasdaq 100 has now reached its 61.8% Retrace (point B) calculated from the October 2007 high to the November 2008 low. Once the Dow reached its 61.8% Retrace in late 1938 this was then followed by a sharp pullback (points A to C) before another retest occurred in late 1939 (points C to D) which was followed by a gradual decline though early 1942 (points D to E).
Meanwhile another thing I keep hearing is that the US will not repeat the same mistakes Japan did in the 1990's with regards to their economy which has been followed by a 20 Year Secular Bear Market that began in late 1989. Thus it's certainly not totally impossible the US Market could suffer an extended Secular Bear Market as well. Notice the Nikkei 225 has had some significant Bear Market rallies the last 20 years but the overall trend has been for lower Lows.
As far as the near term the S&P 500 so far hasn't been able to rally back to its next key resistance area near 1121 which corresponds to its 50% Retrace (green line) calculated from the October 2007 high to the March 2009 low. In addition the longer term downward trend line (black line) also comes into play near 1121 as well. Meanwhile as you can see the S&P 500 has been holding support along its upward trend line from the March low (blue line) as it traces out an ABC corrective rally. Once this trend line is broken then that may signal a change in longer term direction.
Meanwhile for those that believe the next major Bull Market has begun watch the 200 Month EMA (blue line) as that will be a key support area in the months ahead. When the S&P 500 made a bottom in late 1974 and eventually rallied back above its 200 Month EMA it was able to hold support at or above it (points D) for the next several years. Furthermore also notice when the S&P 500 bottomed in late 2002 (point E) it found support right at its 200 Month EMA as well. Currently the 200 Month EMA in the S&P 500 is just above the 1000 level.
Finally I haven't talked about the 5 Day Average of the Put to Call Ratio in awhile however notice how it has changed in 2009 from the previous 2 years. In 2007 and 2008 significant oversold rallies occurred (points F to G) after the 5 Day Average of the Put to Call Ratio rose above 1.15 (points H). However in 2009 the 5 Day Average of the Put to Call Ratio has only been rising just above the 1.0 level (points I) before signaling a nearing oversold rally (points F to G). Thus the question is will this recent trend continue during the next several months or will we see an eventual transition back to higher readings in the future?
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to the following products.
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's and SPY's.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account.
3. The "End of Month Strategy". 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.
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