So, after talking with my father today about the markets, I had the urge to put up another posting. Lately, we have been seeing some pull backs in the market, but I think that it is important to realize that this is not negative! I've been scanning blogs, checking message boards, reading through random postings on google finance, etc. and it seems to me that the average investor is bearish (I say the "average investor" when referring to those who don't follow the market daily, but rather allow the media to influence their views regarding the market). I've seen many postings online where people seem to have the "Chicken Little" mentality in which they are preaching that the sky is falling.... or rather that the market will fall! The major point I want to make is this... open your eyes and look at what the market has been doing for the past 5 months!!! It has been going up!!! I guess you can continue to say "It's going to fall" and eventually you will be right because yes, we cannot go up forever without some sort of pull back, but overall, the trend is still bullish.
After talking with my dad and explaining my views regarding the market, I decided to confirm them with some charts. So, below, I have posted the weekly chart for the S&P 500 Cash:
If you look at the chart closely, you can see that for the past 5 months, on the weekly chart, we have been in an up trend since hitting the March lows. On top of that, the SMI shows that we were very oversold back in March, and as you can see, we had a crossover to the upside with a very bullish trend that formed which in turn created the rally we have seen for the past 20-25 weeks. Now, if you notice the current candlestick forming for this week, you can see that we are in the midst of a pullback. If anything, this is healthy! We have been pushing up for the past 7 weeks overall, so it is only natural that we see the market pulling back. People are locking in profits!!! Now if we look at the indicators, we have a few things going for us. Currently we are trading below the 200EMA on the weekly S&P cash chart. We are at 997, and the 200 EMA is approximately at 1200 give or take. Also, we can see that we are about to have a 20/50 EMA crossover to the upside, which is very bullish in my opinion. The only negative about this is that we have pulled a little bit too far away from the 20EMA, and we are even trading above the 50EMA. So, my prediction would be that we pull back to the 50EMA, and maybe even the 20EMA. After that, hold on for a move up!!! Things are bullish. September is here, volume should be increasing soon, and things seem to be setting up nicely. As for the stochastics, we are trading in an over bought region (current value of 77), but this is not a terrible thing. A minor pull back will bring the SMI down a bit, and once we see it cross over to the upside and/or become embeded, I feel that we will see the market push upwards over 1000 and up to or even over 1100. The move may not be explosive, but regardless, I feel that we have some decent upside potential.
S&P daily chart:
Now, looking at the S&P daily chart, we can see that we are currently in a pull back. The stochastics have turned to the down side, and we are currently looking for an area of support. If you compare both the weekly and daily charts, yes, you will notice that there is more noise in the daily chart, but more importantly, you can see that there is some nice support right around 950-960. Interestingly enough, if you refer back to the weekly chart, you can see that the 20 EMA on the weekly is at 950-960ish. So, as I said earlier, I see us pulling back to this area, and then pushing right back up!
Based on the weekly chart, I am bullish. Of course, this is just my interpretation of the market and I want to point out that yes, I could be wrong... so please take this for what it is worth!
That's all for now!
