A broad variety of longer term indicators shows that the market has
turned up from one of its weakest periods in history. The one
exception is the Wilder ADX indicator, which has yet to flash a buy
outside of 20 weeks. It has signalled a change in the direction of
the trend to positive, but is moving very slowly toward a full scale
buy. Several indicators, and I have looked at over 10, show that
positive price momentum off the early Mar. '09 low has been very
strong, too strong perhaps for the longer term.
The SP 500 is also nearing a very important downtrend line that
extends from the May, '08 rally and catches the Aug. '08 interim
high. This line down is significant because the market rapidly fell
apart into a crash shortly thereafter. So this will be a big test of
trend out ahead. The market is now well through and past the crash
down lines.
The SP 500 13 wk. m/a is rising and is threatening to pop above
the 40 wk m/a. Some technicians call this eventuality a "golden
cross" which is seen as providing a confirmation of a durable
advance (providing the 40 wk m/a soon turns up, too). CHART.
Measured on a 40 wk. price oscillator, the market is but rather
mildly overbought. But, when I go out one derivative and look at
that oscillator against a 13 wk. average of itself, I see an
extremely overbought market. Here again, the momentum has
been uncharacteristically strong, even for the onset of a cyclical
bull market. To be to the point, the trajectory of this advance
is nearly twice normal, which suggests that at some point out there
in time, there will be a sharp price correction or extended period
of range bound consolidation or both. In short, when viewed long
term, we are contending with a price rocket.
Now, because the SP 500 took out its 2002-03 lows during the
crash late 2008 - early 2009, we not only ended a long term bull
market, but we have entered a bear market of indeterminate
length. We can see powerful cyclical advances during such a period
and we do not have to plunge to even fresher lows at some point.
But we have to recognize the possibility.
From a short term perspective, resolution of the price rocket
issue is not necessarily a worry. We could see a moderate
correction and a tradable rally in the interim. However, looking
out a month or more, resolution of the price rocket saga could
become more pressing.
1 comment:
Very good article.
In my opinion, it is all a matter of market timing. It does not matter if it is gold, oil, or Microsoft, if you have access to good market timing signals, they will help you get in and out at a profit.
No guarantees in this business, but if they are right most of the time, you can still make $s.
There are may web sites providing them out there (search Google). Just find one that works and use it! Check out http://invetrics.com as an example.
Its Dow Jones timing signals are up 43% as of 6/23/09 while the Dow is up just 29% off its March lows.
Following a market timing system works!
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