Friday, March 11, 2005
Market might remain rangebound
Intermediate term indicators are heading down again, suggesting that more downside/consolidation lies ahead of us. My personal take is that the market might remain rangebound for the next couple of weeks. In particular, the S&P might get pinned to the 1200 strike in options expiration week (next week).
The NASDAQ is heading towards an oversold condition faster than the S&P, both on a short-term as well as intermediate-term basis.
If a shakeout occurs now, one that is sufficient to drive the intermediate term indicators to oversold, that would lead to a more tradable rally. In which case, we might expect the NASDAQ to start outperforming the S&P. The good thing is that the recent upswing to S&P 1225 that subsequently failed never really took the market to overtly overbought levels. Hence a decline that shakes out the weak holders and moves folks to the bear camp now would actually be a welcome development.
The NASDAQ is heading towards an oversold condition faster than the S&P, both on a short-term as well as intermediate-term basis.
If a shakeout occurs now, one that is sufficient to drive the intermediate term indicators to oversold, that would lead to a more tradable rally. In which case, we might expect the NASDAQ to start outperforming the S&P. The good thing is that the recent upswing to S&P 1225 that subsequently failed never really took the market to overtly overbought levels. Hence a decline that shakes out the weak holders and moves folks to the bear camp now would actually be a welcome development.
Tuesday, March 08, 2005
S&P 1250 within striking distance
Some time ago I laid out my Big Picture Expectations for the S&P to be magnetized to the 1250/60 region. I based this on the resonant frequencies of the Square-of-Nine chart, and that the first downturn of the S&P weekly chart after the Oct26 2004 up pivot marked the mid-point of the current advance, which indicated an eventual target of S&P 1250/60. However I did not expect this to unfold after such a long time (few months), and after such unprecedented volatility.
I thought my Big Picture was about to be destroyed when the S&P executed a near-waterfall decline in Jan 05, and every intermediate term indicator I tracked embarked on a solid downtrend. But I also stated back in late 2004 that as long as the S&P defended the 1160/65 zone, the Big Picture could still have a chance of playing out. Now the S&P has capitalized on this setup and is within striking distance of the profit zone.
A successful capture of 1250/60 might even protend a bigger move ahead. It is entirely possible that 2005 might yet mark another good year for stocks, with S&P capturing upside targets of 1350, then 1400. The weekly, monthly as well as quarterly swing chart tells us that such a scenario is althogether possible, and has valid technical underpinnings based on large scale inverse H&S patterns. the impressive Aug 2004 reversal pivot, and the stunning Oct 2004 breakout that has so far held.
The conflux of time suggests that March might see an important inflection point. An inflection point can be a reversal or an acceleration. If an acceleration begins in the March timeframe, we could well see new multi-year highs in major equity indices being attained. On the other hand, if March represents a reversal, then we can see a very meaningful correction, especially if the S&P hits 1250/60 in March.
Intermediate term indicators still look very patchy and sentiment is not where I would like it to be for a meaningful rally to occur. We will be overbought by Wednesday. If by Wed we hit S&P 1250, it would be a very nice place to go short.
I thought my Big Picture was about to be destroyed when the S&P executed a near-waterfall decline in Jan 05, and every intermediate term indicator I tracked embarked on a solid downtrend. But I also stated back in late 2004 that as long as the S&P defended the 1160/65 zone, the Big Picture could still have a chance of playing out. Now the S&P has capitalized on this setup and is within striking distance of the profit zone.
A successful capture of 1250/60 might even protend a bigger move ahead. It is entirely possible that 2005 might yet mark another good year for stocks, with S&P capturing upside targets of 1350, then 1400. The weekly, monthly as well as quarterly swing chart tells us that such a scenario is althogether possible, and has valid technical underpinnings based on large scale inverse H&S patterns. the impressive Aug 2004 reversal pivot, and the stunning Oct 2004 breakout that has so far held.
The conflux of time suggests that March might see an important inflection point. An inflection point can be a reversal or an acceleration. If an acceleration begins in the March timeframe, we could well see new multi-year highs in major equity indices being attained. On the other hand, if March represents a reversal, then we can see a very meaningful correction, especially if the S&P hits 1250/60 in March.
Intermediate term indicators still look very patchy and sentiment is not where I would like it to be for a meaningful rally to occur. We will be overbought by Wednesday. If by Wed we hit S&P 1250, it would be a very nice place to go short.
