Monday 26 March 2012

Slaughter of the lambs (Bears).

I expected today to be range bound but it turned out to be the day of a new high thanks to uncle Ben.  In a way it is consistent with the bigger theme which I have been writing for so many days. That while we can expect some weakness in the last week of March, we are ultimately going to 1450 in SPX. Any dip therefore is a buying opportunity. Question in my mind was about the degree of correction and after today’s price action we can be sure that it will not be much. Even 1380 would be lucky.  The following is from Uempel.

Today’s price action has pushed NYMO in positive territory from where a small correction can be started.

Why am I still looking for a small correction now? Among other things, seasonality. The following table is from Stock Trader’s Almanac.

So a correction in the range of 2-3% is in order.

Also, with the blow of the top rally due in April, markets cannot run higher when they are already extended. Therefore some profit taking before the quarter end is in order. That will also shake out the weak hands.

Will today’s high be considered a valid breakout?
Probably not but what does it matter. It is still a high and we are still looking for higher high. Already folks are talking about 1500 SPX by mid-April and everyone is getting giddy with excitement. So a little lesson in history is in order. The following is a chart from Chris Kimble which is self explanatory.

I am not suggesting that we have reached that stage and we may well renew the upward journey after summer but right now the market moves do seem parabolic. Let us see what tomorrow brings.

Thank you for reading . Please forward it to your friends and join me in Twitter for live market commentary. (@BBFinanceblog). 


  1. BB, if you find some time to comment on this: and/or provide some background information this would be great - thanks!

  2. Hi Ringo, Nice to see you. I will definitely go through this and give you my two cents.

  3. OK, I just read the article. The point is, this guy is in no better position than your or I to say whether SPX will go up or down. It is just his opinion.
    As I see it, Because it is an election year, Obama will flood the market with liquidity. He has seen how MaCain lost because when stock market plunged. Also all the central banks are pumping more and more money just to re-flate the markets. I think by Oct. end , SPX would be somewhere near or above 1500. Then the dam will burst. But before that we will have some correction my mid-April.

  4. Thanks for your comment! Actually, there's also a video with him which might be more useful than the link I sent yesterday: