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Saturday, November 14, 2009 5:51:07 PM
Amateur Investors Weekend Market Analysis (11/14/09):
http://rivals.yahoo.com/ncaa/football/boxscore?gid=200911140020
All of the major averages have rallied back to longer term Retracement Levels calculated from the October 2007 highs to the March 2009 lows except for the S&P 500. The Dow has reached its 50% Retracement Level (point A) just below the 10400 level.
So far the S&P 500 hasn't quite reached its 50% Retracement Level which is at 1121.
Meanwhile the Nasdaq is about halfway between its 50% Retracement and 61.8% Retracement Levels.
On a daily chart the Nasdaq is exhibiting a potential Broadening Top pattern with an example shown below. This chart pattern consists of 3 higher highs (Waves 1, 3 and 5) while the 4th wave makes a low lower than Wave 2. Once the pattern completes then a reversal of the trend occurs.
A daily chart of the Nasdaq shows that it's developing a similar Broadening Top pattern and if it makes one more slightly higher high around 2215 then that would complete the pattern.
Meanwhile for those that follow Bullish-Bearish Sentiment let's look at some longer term charts going back to the late 1960's. The chart below is a Bull-Bear Ratio such that negative values mean sentiment is Bearish while positive values are Bullish. The actual sentiment values are in gray while a 20 Week Moving Average is denoted by the red line. Meanwhile the blue line is the weekly close of the S&P 500 which isn't adjusted for inflation.
Since the late 1960's significant bottoms in the S&P 500 have occurred when the 20 Week Moving Average (red line) has dropped to at least a value of -20 as denoted by black line which includes the years of 1970, 1974, 1982 and 1994 (points A). All of these were then followed by substantial rallies ranging from 64% up to 232%. In addition a secular Bear Market Low occurred in late 1974 as the 20 Week Average spiked down to below -30. Meanwhile notice the low made in late 2002 wasn't accompanied by an excessive amount of bearishness as the 20 Week Average never dropped below the 0 line (point B). Recently in March of 2009 the 20 Week Average reached -15% (point C) which has been followed by a 65% rally in the S&P 500.
Thus the question is did enough bearishness occur earlier this year to define a secular Bear Market Low like occurred from the mid 1970's through the early 1980's? To answer that question I increased the moving average to 100 weeks instead of 20 weeks as shown in the chart below. The thing that stands out is that prior to the beginning of the last Secular Bull Market (1982-1999) the red line remained below the zero line (black line) for a substantial period of time from 1978 through 1982 as there was a considerable amount of built up bearishness in the market. In addition notice all of the weeks the gray lines were well below the zero level as denoted by the pink box. Furthermore notice there was a lot of pessimism prior to the big upward move from 1995-1999 as well as the 100 Week Average dipped below the zero line (point D). Meanwhile if you compare the recent bearishness to that of the late 1970's and early 1980's so far the amount of bearishness (brown box) hasn't reached the same intensity as we saw in the late 1970's and early 1980's prior to the beginning of the last Secular Bull Market. Maybe this time will end up being different.
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://rivals.yahoo.com/ncaa/football/boxscore?gid=200911140020
All of the major averages have rallied back to longer term Retracement Levels calculated from the October 2007 highs to the March 2009 lows except for the S&P 500. The Dow has reached its 50% Retracement Level (point A) just below the 10400 level.
So far the S&P 500 hasn't quite reached its 50% Retracement Level which is at 1121.
Meanwhile the Nasdaq is about halfway between its 50% Retracement and 61.8% Retracement Levels.
On a daily chart the Nasdaq is exhibiting a potential Broadening Top pattern with an example shown below. This chart pattern consists of 3 higher highs (Waves 1, 3 and 5) while the 4th wave makes a low lower than Wave 2. Once the pattern completes then a reversal of the trend occurs.
A daily chart of the Nasdaq shows that it's developing a similar Broadening Top pattern and if it makes one more slightly higher high around 2215 then that would complete the pattern.
Meanwhile for those that follow Bullish-Bearish Sentiment let's look at some longer term charts going back to the late 1960's. The chart below is a Bull-Bear Ratio such that negative values mean sentiment is Bearish while positive values are Bullish. The actual sentiment values are in gray while a 20 Week Moving Average is denoted by the red line. Meanwhile the blue line is the weekly close of the S&P 500 which isn't adjusted for inflation.
Since the late 1960's significant bottoms in the S&P 500 have occurred when the 20 Week Moving Average (red line) has dropped to at least a value of -20 as denoted by black line which includes the years of 1970, 1974, 1982 and 1994 (points A). All of these were then followed by substantial rallies ranging from 64% up to 232%. In addition a secular Bear Market Low occurred in late 1974 as the 20 Week Average spiked down to below -30. Meanwhile notice the low made in late 2002 wasn't accompanied by an excessive amount of bearishness as the 20 Week Average never dropped below the 0 line (point B). Recently in March of 2009 the 20 Week Average reached -15% (point C) which has been followed by a 65% rally in the S&P 500.
Thus the question is did enough bearishness occur earlier this year to define a secular Bear Market Low like occurred from the mid 1970's through the early 1980's? To answer that question I increased the moving average to 100 weeks instead of 20 weeks as shown in the chart below. The thing that stands out is that prior to the beginning of the last Secular Bull Market (1982-1999) the red line remained below the zero line (black line) for a substantial period of time from 1978 through 1982 as there was a considerable amount of built up bearishness in the market. In addition notice all of the weeks the gray lines were well below the zero level as denoted by the pink box. Furthermore notice there was a lot of pessimism prior to the big upward move from 1995-1999 as well as the 100 Week Average dipped below the zero line (point D). Meanwhile if you compare the recent bearishness to that of the late 1970's and early 1980's so far the amount of bearishness (brown box) hasn't reached the same intensity as we saw in the late 1970's and early 1980's prior to the beginning of the last Secular Bull Market. Maybe this time will end up being different.
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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