Swenlin/ shorter term forecast written 3/27: Swenlin longterm is a feirce Bear, BTW.
i post text, to see charts just click the link
BEAR MARKET RALLY
3/27/2009
decisionpoint.com
Bear Market Rally
by Carl Swenlin
March 27, 2009
At the end of last week the market had made impressive progress through a strong zone of resistance, but it had become extremely overbought on a short-term basis. My conclusion was that we should at least get a short-term correction, since we are in a bear market. Instead, short-term indicators backed off while the market continued higher. This is bullish behavior -- the kind of thing you will see time after time in a bull market. That does not mean we are now in a bull market, but it does imply that the current price advance (now about +25%) may not be over. During bear market rallies, the market can persist in positive behavior, so that many people think a new bull market has begun. But eventually, the bear reasserts and the down trend resumes.
On the chart we can see that there is a short-term line of resistance just above current price levels. Even if the rally is destined to continue, it is likely that we will experience a short-term pull-back as the market prepares to break through the resistance. (3/27)
chart
I don't mention nominal cycles much any more because they can muddy the water, but based upon my cycle count, a 20-Week Cycle low is due in a week or so. A possible scenario is that, after a short correction/retest, a new 20-Week Cycle could launch the second half of the current rally. My upside target would be about 1,000 on the S&P 500.( edit, mine is 920. Max,FWIW)
Our mechanical Thrust/Trend Model (T/TM) for the S&P 500 switched to a buy signal on 3/17/2009, and virtually all index and sectors we track have also switched to buy signals. All these new T/TM buy signals are in short-term mode at this time. They were triggered when the Price Momentum Oscillator (PMO) and Percent Buy Index (PBI) crossed up through their moving averages. We are now waiting for the 20-EMA to cross up through the 50-EMA, which will confirm the short-term signal and make whipsaw less likely.
chart
Bottom Line: The market recovered from a severe breakdown in prices, something I did not think it could do. This is evidence that possibly a new bullish phase has begun, but, in my opinion, it is a bull phase of an ongoing secular bear market. The rally can be played on a short-term basis, with the idea that we are riding a bear, not a bull.
. . . . (edit:A Max Rule: Never ever ever ever underestimate Bulls to generate a DEMENTED RALLY in the midst of terrible times. The 50% rally in early 1930, was UTTERRLY INSANE, but it HAPPENED anyway.Anyone that trades the market on the basis it is rational, O MY. i note that TSR wants this rally to 162ema of SPX as it will then be a HUGE VERY LOW RISK AGRRESSIVE SHORTING OPPORTUNITY(agrressive for them is 3xultrashort--BGZ--Max(VBG!:)
MAIL
Hi Carl,
I normally don't chime in and I am long at the moment (so take it for what its worth) but I think you need to keep an open mind re a bottom. True we were or are in a bear and the easy analysis is to just keep calling it a bear, but if you think about what a bottom would look like in this environment it would look like exactly what we're seeing. Mostly a bottom would show inordinately high indicator readings to the upside...in this case the second highest readings ever. I personally wouldn't buy until a pullback but that's what you're calling for here...and I agree and we got it with perhaps more to come. Just ask yourself that if you were looking at your indicators what would they register (look like) on a rally off a bottom. I think we're here. (Written 3/20/2009)
ANSWER: You are right that these are the kinds of readings we will get at a bottom; however, in a bear market, there is about an 80% chance that bullish readings will be wrong, so be careful. Our mechanical models will pull us in long before we actually know that a new bull market has begun. For us, it will be a bear market until the 50-EMA crosses up through the 200-EMA. at that time we will start shading our analysis and conclusions with a bullish bias.(<edit> This is key TA indicator i will attach a chart now showing SPX where it 50ema crossed above 200ema in 2002/2003, and the to show where we are now regards 50ema/200ema).Max
Carl
Technical analysis is a windsock, not a crystal ball. Be prepared to adjust your tactics and strategy if conditions change.
* * * * * * * * * * * * * * * * * * * * *
2002/2003 SPX 50/200
Now SPX 50/200
disclaimer, i Max am 20% long/80% cash.
|
