Stockmarket Update 21 December 2009

A routine update for the period ending 18 December 2009.

Since my last update very little has changed with respect to stocks. I will review the S&P 500 Index from the monthly charts downwards:


SPX 11 year monthly:



The first "long term" term view of the markets shows the buy signal at the end of July when price closed above the 12 month simple moving average (12 mSMA).

Price has risen to exactly the 50% Fibonacci retracement level (as shown on the chart). This is a natural point at which the market needs to "decide" whether it will continue it's advance or roll over and commence it's next downturn.

As I pointed out in a previous post, in the last bull market price stalled at the 50% Fib and spent 10 months consolidating its price before gradually being pushed upwards by the 12 mSMA. It is very possible the same could happen again.

The long term chart remains bullish.


SPX 3 year weekly:



The 2nd of my "long term" charts begins at the 2007 top to the current date.

This chart turned interim bullish in late March, 2009 on a price break above the 13 week simple moving average (13 wSMA) combined with follow-thru technical breakouts on the Stochastic midpoint and Force Index (as shown in green on the chart).

The bullish cross was confirmed in late July when the 13 wSMA crossed above the 34 wSMA (as noted in green on the chart).

Price has formed a rising bearish wedge. Normally this would be expected to break to the downside with a return to the bottom of the wedge at 666.79. That is the danger we face.

Alternately, price has been pushed into a "corner" as defined by the lower rising trend line, the 50% Fibonacci level, the last level of strong volumetric resistance, and the downtrend line from the market top in Oct, 2007. This is a key "battleground" between the bulls and the bears.

Should the bulls be able to break price above the current level there is a very good chance price will advance rapidly through the level of weak volumetric resistance on the chart and challenge the 1200 level (another 10% rise). This would negate the bearish wedge as price would break "the wrong way" above the upper wedge boundary and set up a bullish continuation pattern.

As of today this long term chart is still bullish.


SPX PNF Traditional:



The point and figure chart remains bullish and points to a price target (based upon the structure of the chart) of 1295.


SPX 1 year daily:



A nice 1 year view shows the trend line from the Mar, 2009 bottom and price action to date.

The strong level of volumetric support and resistance is clearly shown. The strongest "zone" is between 1080 and 1120 with the next level between 1080 and 1040.

A price break below 1040 shows very little support until the next strong volumetric support bar between 930 and 890.


SPX 6 month daily:



The 6 month daily chart shows the well defined channel as well as the "bull flag" I discussed previous. Price has moved sideways for over a month now between 1080 and 1120.

I do not like the negative divergences in the RSI and MACD........when price advances while technical indicators decline that is usually a sign of a forthcoming price reversal downwards.

The longer this range bound price action continues the more "established" bulls and bears become in their respective positions. Those who are "committed bulls" will be long the market with stop loss levels set just below 1080. Those who are "committed bears" will be short the market with stop loss levels set just above 1120.

I cannot predict which way this finally breaks....up or down. What I can predict is when it does there will be a hell of a move in the direction of the breakout or breakdown. Above 1120 and 1200 comes quickly. Below 1080 and 1040-1020 comes quickly.



Bottom Line:

The markets continue to be stuck in a trading range between 1080 and 1120. It is impossible to predict which way this will go.

I remain bullish as the current trend is up but am watching the trading range closely. A break of 1120 would be very bullish and continue the current cyclical bull market. My next target should that occur would be 1200.

A break of 1080 might be the first sign that the cyclical bull has ended and we are on the road to resume a downtrend back towards 666. The dreaded "C" wave in Elliott wave theory (as I have discussed previous) would have begun.

I wait and watch. The bull is doing it's best to throw me off. I am still riding this bull but the beast may be about to get much meaner. If you are in the markets you need to stay nimble.


As of today my strategic position within the Provident Fund remains unchanged at a 50% Equity/50% USD cash position.**

The ECAM Asset Allocation Fund remains 100% invested. I will blog those charts separate.



**Strategic allocated percentages are as per how funds were originally allotted. Due to market fluctuations and ongoing equity monthly purchases these amounts vary several % from that posted (refer to current % holdings).



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