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Technology Stocks : Semi Equipment Analysis
SOXX 302.84+2.0%Dec 2 4:00 PM EST
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To: Sam who wrote (49552)9/26/2010 11:27:31 AM
From: Return to Sender2 Recommendations  Read Replies (2) of 95515
 
Amateur Investors Weekend Market Analysis

amateur-investor.net

Early in the Summer I talked about Market Performance prior to a Presidential Election Year. As the table below shows there has been a Bullish bias ever since the early 1940's with not one losing period which is pretty amazing. The lowest return was 5.7% in 1946 while the highest return has been 41.8% in 1986. Also notice 16 out of the 17 occurrences (94%) had at least a 10% gain with an average return of 20.5% for the time period from November through August. 

Dow Performance prior to a Presidential Election Year since 1900
                    Time Period (November-August)
 Date 	  Monthly      Date 	Monthly  Return
	   Close       Close 	
Oct-02     66.05      Aug-03     53.19   -19.5
Oct-06 	   92.91      Aug-07 	 72.28 	 -22.2
Oct-10 	   84.77      Aug-11     79.25    -6.5
Dec-14 	   54.58      Aug-15     81.2     48.8
Oct-18     82.46      Aug-19    104.75    27.0
Oct-22 	   96.11      Aug-23     93.46    -2.8
Oct-26 	  150.76      Aug-27    189.79    25.9
Oct-30 	  184.40      Aug-31    139.4    -24.4
Oct-34 	   93.40      Aug-35    127.9     36.9
Oct-38 	  151.75      Aug-39    134.4    -11.4
Oct-42    114.10      Aug-43    136.60    19.7
Oct-46    169.20      Aug-47    178.90     5.7
Oct-50 	  225.00      Aug-51    270.30    20.1
Oct-54 	  352.10      Aug-55    468.20    33.0
Oct-58 	  543.20      Aug-59    664.60    22.3
Oct-62 	  589.90      Aug-63    729.30    23.6
Oct-66    807.10      Aug-67    901.30    11.7
Oct-70 	  755.60      Aug-71    898.10    18.9
Oct-74    665.50      Aug-75    835.30    25.5
Oct-78 	  792.50      Aug-79    887.60    12.0
Oct-82    991.70      Aug-83   1216.20    22.6
Oct-86	1,877.70      Aug-87   2663.00    41.8
Oct-90  2,442.30      Aug-91   3043.60    24.6
Oct-94  3,908.10      Aug-95   4610.60    18.0
Oct-98  8,592.10      Aug-99  10829.30    26.0
Oct-02  8,397.03      Aug-03   9415.82    12.1
Oct-06  12,080.73     Aug-07  13357.74    10.6
Oct-10      ? 	      Aug-11     ? 	    ?
			Avg Return  20.5%

Thus the question is will this consecutive winning streak continue or will it not work this time around? Meanwhile they are already ahead of schedule with ramping the market into this historically bullish time period as the S&P 500 is up 9.5% in September.

Looking at some chart patterns we have one potentially bullish pattern and one bearish pattern from the early July low. The bullish count is that we are seeing an "ABC" Zig Zag pattern from the March 2009 low as Wave A peaked at 1220 in late April. Meanwhile the drop from 1220 to 1011 was the bottom for Wave B which is now being followed by the early stages of Wave C. The potential target for Wave C would range from 1353 to 1381. 1353 would be 61.8% of Wave A (553 points) which equals 342 points added to the bottom of Wave B (1011) so that = 1353. Meanwhile 1381 is the longer term 78.6% Retrace calculated from the October 2007 high to the March 2009 low. This pattern would be confirmed by a rise above the previous late April high of 1220.

Finally once the "ABC" pattern completes then another major sell off occurs from 2012 through 2013 as the next Fed induced bubble bursts and wipes out everyone once again.




This pattern has happened in the past from the late 1960's through the late 1970's as three different times significant sell offs followed completion of each "ABC" pattern.




Meanwhile there is also one bearish pattern as we could just be seeing a minor "abc" type Zig Zag pattern off of the early July low of 1011. If the length of "c" = the length of "a" that yields a value of 1158.



Once the minor "abc" Zig Zag pattern completes then Wave 3 of (5) would begin. This pattern would be confirmed if the S&P 500 drops back below the early July low of 1011.



Finally the Volatility Index (VIX) which made a big move higher in May and June has now formed a Triangle pattern and is set to make another run higher or lower depending on which way it breaks out.

Naturally from a historical perspective the bullish scenario, as alluded to above, would have a higher probability of occurring due to the pre Presidential Election Year positive bias that has existed since the early 1940's. However like anything else eventually one of these times it isn't going to work and the consecutive winning streak well be broken.
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