Sunday, September 16, 2007

^GSPC Chart - Yahoo! Finance

^GSPC Chart - Yahoo! Finance

I had mistaken my previous pivotal (lateral/horizontal support levels) of 1420's, widening my scope literal pivotal support to 1374, though as support is mostly never literally hits i would call support around 1380's. Personally i would see this as a great opportunity to get in the markets as when the price level is reached. As i see it now, around 1420's on August 9th a huge spike in volume accompanied by a large bearish bar occurred showing signs of a false recovery, quit possibly a dead cat bounce (minus the tell tale gap to the downside). Huge spike in volume can only indicate a further down trend. AND so a doji was formed the next day and the following day on the 11th a doji to the downside only confirmed this with lessening volume .... all bearish indicators. The reason i call the support level of 1370-80's to be legitimate is because it is a level everyone is drawing the same level of support. The fundamentals of the economy with a some what tight labor market, complacent but not weak consumer, w/ the start of school season coming in full force, with low interest rates only can say that this is a temporary pull back. All reflecting credit and mortgage fears, moves purely based on news not fundamentals. The other possible scenario is that fears and panic are only starting and hit force and BREAK down support, and would only lead into a recession until price levels reach support at 800's but that would be ridiculous to call such a thing in my opening. Though the idea of recession is quite an apparent risk, i doubt it it has the momentum to continue so low considering the pure fundamentals. Considering on the MACD, volume is letting up i can only see as imminent as bears are getting tired and bulls will at least lash out at the 1370's support level. By taking a picture on the fullest of the S&P this is a merely tiny bump in the road that can possible fall to 800's but unlikely. considering steady GDP and core cpe growth. The S&P 500 is merely hitting resistance at the 1500's and needs some more pivotal support to build up before it breaks through and continues steadily.

Reiterating, i still believe fundamentals are strong but are still reacting on news and media and will reach support of around 1370's-80's as where a good buying opportunity exist. Naturally for all you people who have margin/futures account can easily hedge your positions. Suggesting to hedge it with index options or future contracts. simply go short on the positions, and you can further hedge those , though if Im wrong you can sell the short positions right away and the bullish call should be more than enough to make up for the slight lose. I will not go into a complex strategy as i have not been following future markets as thoroughly.

Again i think the bond markets are being too wishful, interest rates are low as ever, with a double whammy with mortgage problems/credit + housing there is no way the Fed's will cut if the other fundamentals remain with the presence of inflation at hand. And as it is now, people are still scared of the equity markets as reflected in the sudden price move in the bond markets reflecting as the yield shows to be at 0.471%. (it can see how bears can put up a decent argument for a recession, but not as compelling as a bullish stance).
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Thursday August 16, 2007 - 07:57am (EDT) Edit | Delete | Permanent Link | 1 Comment

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