Sunday, May 3, 2009

S&P 500 Market Commentary May 2, 2009

This will be brief considering my constrained schedule for May and first two weeks of June:

Talk about a bad bad week last week. Pretty much almost wrong on calls I made last week. Sentiment was very bullish last week, I should have noted the Vixx index remaining bullish at the start of the week. Despite a strong drop and lows in the 840's, Price levels never reached the 30's as I predicted, and the week closed at my second resistence level at 877. Resistence has held at 877 but the mid week saw price action well into the 880's (though there has not been a strong close above 877). Again with blantent ignoring of economic fundamentals this rally continues into week 9 of the bear market rally.

It would seem the masses are confident in the combined monetary and fiscal efforts, however I still am not convinced, but at this rate if price levels close strongly above 877 my next price target will be around 930 (reaching this level in the time frame during the third quarter).

What I did wrong last week:

1. I probably went with a poor gut feeling last week.
2. I let the longer term trends affect my call in the shorter term.
3. Possilby I didn't consider the slower movements in the equity markets as Im used to the speed of price movements in spot fx markets.
4. I didn't wait for very clear confirmation on the charts in order to take a full out bearish stance (this idea kinda coincides with number 3)

Next Week:


I will say the case for next week being bullish is not very convincing however. Considering the volume on April 30 vs. May 1st. Though one can see thursday was a day for the bearish with high volume, the long upper shadow indicated the strength of bears where not so strong which led to a higher high on May 1st. Though May first was a bullish day, there was nearly a difference of 1.5 million in volume compared to thursdays down day. In addition, examining May 1st's candle indicates bearish sentiment lingering with a long lower shadow.

Such a volume trend is not convincing for a bullish arguement.

The Vixx:

However, looking at the CBOE vixx index, it seems that investors are very bullish from thursday to friday from 1.08 (neutral/bullish) to 0.28 (bullish). (If I had time I would love to back test the vixx in comparison to the S&P500 to see how effective the vixx would be to use in forecasting the S&P500 in this current environment; will probably have to wait until summer begins).


Considering that Bernake will speak again twice this week, its more likely that this will be another bullish weak if the markets really believe bernake in the short term.


Considering we get a strong break in 877 I will say the end of the week will reach price target of 894 (890's).

(I reached this number by approximately averaging the past 8 weeks weekly increases of the bear market rally, however considering that I believe this rally is losing steam inconjunction with volume prices may only reach in the 880's, there will need to be a strong correction (to the downside) and strong support at 877 or 870 in order to reach my prior price target of 930's, which probably won't be seen this second quarter).

If this rally were to fail this week:

I would probably say this coming week would see a price target of 842. Considering the risk reward ratio, a 2% gain from the bullish side vs the 4% gain from a short on the bearish side, it would seem it would be better to be bearish. However, considering last weeks performance, and not full out clear signals on the charts, Id say this rally has some steam left in it.

Hopefully the markets are pricing any bad news the economic reports will have along with bearnakes speeches.


This week I will stick with the bullish arguement (though my longer term outlook is still bearish). In this case, I forecast prices to probably drop in early week due to bearish signals at the end of last week carrying over, and then prices to close above 877 strongly this week, and end on the high side of around 880 - 890.

No comments:

Post a Comment

This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.