When will the S&P500 hit 1200?

The markets are still defying gravity and it seems the best strategy has been to sell shorts on the dips (or buy bulls). This is what I did last week which resulted in the big gains on Monday and Tuesday. GS rallied up to 180 and until Financials collapse this rally seems to be intact.

If the markets digest this Greek bailout news well it could mean a short term rise in the Euro/drop in the Dollar which means stocks will probably go up. Earnings reports may trump the dollar affecting market performance the next 2 weeks. The futures markets are up tonight and I believe we’ll see SPX 1200 this week, maybe a tad higher, and then a probable pullback on profit taking!

With the DOW hitting the 11,000 level briefly before the close last Friday and solid momentum in the Financial sector and Best of Breed stocks the stage is set for a little more upside IF earnings reports and forward looking forecasts are BTE (better than expected) starting this week. There is a good chance of seeing a little more upside in the next 2 weeks BUT there is a stronger statistical probability of seeing a 10-20% correction in the coming months.

The SPX support levels for a pullback or correction (which I posted in the previous blog) still stand with SPX 1180 as my 1st major support level NOW.

Here’s the PnF version of the current DOW and SPX charts. I adjusted the box size to show the last bounce off the most recent lows, classic higher lows and higher highs patterns still in place-

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Fear and Loathing on Capital Hill or How I learned to love stock market volatility!

Last week was of course historic with the passage of the new Healthcare Reform Act which contrary to many experts did not cause a stock market correction (excluding a 100 pt drop for about 2 minutes early last Monday). If fact the stock markets rallied all the way to DOW 10,980 as an intraday high and the SPX briefly touched 1180 before pulling back.

On Thursday the markets were rocked up and down 100 pts on news the Greece bailout wasn’t appetizing to the EU financial guru Pichet who later that same night decided he liked the plan. 

The US Dollar index peaked close to 83 before pulling back slightly and it’s up/down movement (primarily influenced by worries in Europe) had a great deal of effect on Gold, Commodities, and stocks in general. Interestingly enough the US stock markets are occasionally starting to rally slightly when the dollar goes up and could disconnect from the Dollar Effect if US growth continues to be evident.

Friday the markets rallied up on news of a Greek bailout only to falter again on worries over a S.Korean military ship sinking with loss of life. By the close on Friday the Korean situation was announced to be a probable accident and the DOW recovered 1/2 the daily losses to close the week at 10,850 with the SPX holding support at 1166.

I use Financials and a handful of Best of Breed stocks as my main indicators along with RSI, MACD, Volume, Breadth, and Bull to Bear sentiment. What are these indicators showing for the immediate future?

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DOW 10.7K, new 18 month highs!

Very pleased to see the market continue to melt up after I changed my bias a bit to the bullish side last week. When I saw the SPX clearly hold a higher high on the short term PnF charts I was very positive we’d see DOW 10.7K and quite surprised to see it push to a new 18 month high today. The following are excerpts from the Best of Breed Investing Discussion forum FREE area so those new can get a glimpse of what I write daily. The actual trades are shared in the members only area, via MSN Live, and by email.

Keep in mind RSI signals are showing extreme overbought conditions right now, caution is warranted for bulls, patience is needed for bears.

Looking like more upside is probable in the next 48 hrs unless Financials roll over. Apparently this sector was downgraded today and barely burped. Watch Financials and Real Estate. The VIX (volatility index) went below 17 for the first time in quite awhile.

There is also a lot of buzz about Fund Managers chasing the trend which will cause a continued melt-up going into the employment report early April. This report is supposed to be much BTE but I wouldn’t be surprised to see it cause a SELL the NEWS event if we continue rallying till then.

If Congress approves the healthcare bill over the weekend (as news is now rumoring) then all bets are off. The market might shake it off and keep rallying for awhile but this isn’t the time to dive into this bull market IMHO.

Ready to shift gears on a moment’s notice either way now. The Member’s area has my specific trades and positioning.

10,767 was the intraday (new 18 month) high, very close to my call of 10.8K back in January.

How am I trading this and positioning for the next days and weeks?

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Stock Market testing yearly highs?

Last Friday was the perfect setup for a news driven rally and then a fade into the close which looked probable till the last hour of trading. Looked like at least part of the pop above SPX 1130 was due to short covering but improvement in the employment outlook seemed to be the primary catalyst. Now the stock market seems on a clear path to re-test the yearly highs as there is no resistance between here and SPX 1150. The RSI signals for the SPX and DOW are both almost at 70 which typically signals a reversal and looking at the charts it’s pretty obvious a re-test of highs will result in a slight profit taking pullback.

The key question all professional traders, investors, financial analysts are asking is WHEN will we see the next correction? Will it between now and May as many expect or the last half of the year? There are even a few brave hearts saying this rally will continue till SPX 1200. There are certainly enough potential Black Swans out there to cause several corrections or even a long protracted downturn. Even the most bullish pro’s out there are deeply concerned about the effects of the Fed’s tightening monetary policy and potential tax hikes in the USA after the November election.

All week we had somewhat negative news, low consumer confidence, low home sales, continued economic concerns over Greece, China, Great Britain, and Spain. Regardless of any of this the market continued to “climb the wall of worry”. Our first clue that the rally would continue was on Thursday when GS started breaking out which continued into Friday. This was very good for UYG and FAS but not for FAZ or SKF. The DOW chart has been a story of head fakes lately when it appeared 10,400 was the ceiling. I did predict correctly that strength around 10.4K would lead to 10.5K which is major upper resistance. The DOW clearly broke above that level last Friday and I now believe we’ll see some little pullbacks and a 2 steps forward 1 step back dance all the way to yearly highs or higher near term. The yearly high is going to be met with a lot of resistance as well and would be a good place to consider some more shorts or at least some profit taking.

The VIX Index is showing a major relaxation of fear and its a measure of puts –vs- calls which shows Options traders turning more bullish. The last time it got this low resulted in a 900 pt DOW drop and a 8% (10% intraday) correction. This is the primary reason many of us were adding to our ultrashort positions last week including the highs of the day on last Friday. The ultrashort ETF’s were on an uptrend till the last 200 pt burst upward on the DOW and the SPX breaking above 1125ish.

AAPL, one of my favorite Best of Breed Stocks hit all time highs Friday on news of their impending I-Pad product release and buzz that corporate America may adopt it’s use.

How are we positioned for next week and what do we expect near term? Members of Best of Breed Investing are privy to detailed trading plans via our discussion board, email alerts, and a Live Chat Forum where we discuss trades in real time.

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Stock Market Outlook mid-May

This historic rally finally released some steam and pulled back almost 300 DOW pts last week.  I have Conditional Sell Orders in place to dump large portions of the ultra ETF’s just below DOW 8200. Many are expecting just a little more downside followed by a another rally attempt, many are expecting just the opposite. This week should be enlightening regarding short term direction coming off fairly large profit taking. I still think Tech, Financials, Materials, and Energy will be the best plays coming out of this recession but we will probably see a lot more downside and radical swings before this is over. That’s why I’m playing the ultra ETF’s more, it’s the best way to capture the momentum swings if you can catch the critical pivot points or at least identify them early.

Let’s look at Long term and Short term DOW and SPX charts to get some perspective. Personally I think pullbacks are good to give folks who missed the 1st wave a chance to get onboard. Outlook for Financials, Tech, Materials, Energy over the next 6-12 months still remains quite high. Looks to me like we might see just a tad more downside followed by a surprise rally going into next Friday.

For the next major downturn which may start in late July I’m looking at SKF, FAZ, SRS as ultra short hedges.  Giving up 35% last week due to heavy ultra ETF exposure was equivalent to roughly a 10% overall pullback.

At about DOW 8270 I added ~20% to positions in URE, UYG, UYM, ERX all of which had 20% taken out in profits about 3 weeks ago. This will probably be my last upside bet going into the summer and I reserve the right to change direction at a moment’s notice.

USD	PROSHARES ULTRA SEMICONDUCTORS PROSHARES							15.25% Original shares up 37%
AAPL	APPLE INC							30.7%
MOS	MOSAIC CO							66.9%
DXO	POWERSHARES DB CRUDE OIL DOUBLE LONG ETN							52.8%
FSLR	FIRST SOLAR INC COM							57.3%
X	UNITED STATES STEEL CORP							50%
GS	GOLDMAN SACHS GROUP INC							67.2%
URE	PROSHARES ULTRA REAL ESTATE PROSHARES							38.1% Added ~ 20% at lows
ERX	DIREXION DAILY ENERGY BULL 3X SHS							44%  Added ~ 20% at lows
UYM	PROSHARES ULTRA BASIC MATERIALS PROSHARES							47.6% Added ~ 20% at lows
BGU	DIREXION DAILY LARGE CAP BULL 3X SHARES							104.8%
TNA	DIREXION DAILY SML CAP BULL 3X SHS							112%
FAS	DIREXION DAILY FINANCIAL BULL 3X SHARES							87.6% Original shares up 262%
UYG	PROSHARES ULTRA FINLS PROSHARES							87.3% Added ~ 20% at lows. Original shares up 150%

Real Time Average portfolio gain at +63 as of Friday’s close. Gave back 36% last week.

I’m discussing daily moves, etc… with all the members intra-daily at- http://bestofbreedinvesting.com/board/