Friday’s breakout of the consolidation on the S&P 500 (futures) may have delighted the “bulls” in this market. However, even with the unconvincing volume behind this move (see chart 1), I remain sceptical.
The first reason is do with the fact that most traders who have been short on this market would have placed their stops at the previous August and September highs (e.g. the 1225 region in the case of S&P futures). Therefore as the market edges towards these previous highs, it will start taking out those stops (in fact it has probably already started doing so).
This short-covering rally will result in the market pushing further higher, with the S&Ps (ES) reaching 1250 and potentially 1260 and the Nasdaq (NQ) reaching 2400.
Secondly, as the stock market pushes higher it is going to face some major hurdles. On the S&Ps, the most important is the confluence of three major resistance levels: (1) the weekly 50 Moving Average, (2) the 61.8% fibonacci retracement of the May-October decline (see chart 2 below) and (3) the daily 200 moving average currently at 1260.
Clearly, at these key levels a decision will have to be made where the bulls and the bears will have to fight it between them. Personally I am not going to stand in the path of this upward momentum (notice also the weekly MACD turning bullish).
As to who will win, allow me to draw your attention to an interesting comparison of this market to something similar that occurred in early 2008. In the first quarter of that year the markets also formed a double bottom and then raced higher to the weekly 50 MA and the 61.8% fibonacci retracement level. As we know, the bears won that race…
So will the bears win again this time round? I believe the uncertainties around the eurozone are far from over, and even with the “rescue plan” of Greece, we are miles away from seeing the end of this crisis.
Do you agree with my analysis in this post? Let me know what YOU think and leave me your comments below.
Very nicely said, once again! I totally agree with you.
no i don’t agree
Thanks Helen. I thought you might (As one “bear” to another). Cheers.
Helene Öhman you should do your won research! Don’t just agree with everything you see on the internet!
catastohpy…..you make my day..so i have to work with you to find a way how i can servive..thank you
Hi Robert – I appreciate your input, but I don’t think Helene or anybody just “agrees” with anything they read on the internet. If you don’t agree, then be kind enough to state why you don’t agree – preferably with some constructive arguments. Thanks.
I am a bull and don;t agree with you! believe it or not in the last month alone I made £150,000 from trading bank shares just by buying low and selling high
I will give you one small example Barclays PLC (BARC:LSE) shares have risen by 35.88% since Sep 23, 2011.
The market fell 5 straight months through September. It would be normal to see a bounce for 2-3 months. Fund managers are behind or just at break even for the year and they want their bonuses. Seasonality and election cycles support more upside. I expect more news driven volatility with an upward bias to stocks and commodities.
I cannot predict what s&p will be going on…
but I believe the market makers will not “draw” extractly the same chart of 2008…
robert you sound like a typical lieing bozo trader. most of us are real traders, we dont believe u, we look at charts all day, u have to prove it. ill be happy to sell you those shares of banks real soon. cause when the news comes out that euro finally fails and B of A collapse u will be dieing to get out of it. its a strong market right now and we trade what we see till we dont. don’t hate on other people for trying to learn or stating there opinion. there are bulls and bears, u can fight all day and still no one is better then the other. keep collecting bank stock lol. first of all i can find a million different opportunity of other assets to trade the are way lower risk and higher probability, then bank stocks thats a pop corn trade. have fun, ill sit back and enjoy my popcorn and watch what happends
Robert I made $250,000 by staying at a holiday in last night.
Not enough volume. I reckon it will fall soon.
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Robert, please ignore the negative comments. I’m interested, what was the basis for you thinking the bank shares were low? Why did you jump in when you did? Why didn’t you buy in August?
Hey Robert, I too would be curious what signals you saw in order to invest ~£400k or more into banking shares. That would seem mighty risky for a rather large sum of money to many people.
Joe before I will even reply to your comment, you will need to re-read your comment and then learn the correct spelling and usage of the following words used in your comment.This will put you a step closer to my level then we can start from there
lieing
ill
dieing
there/their
collapse/collapses
then/than
happends
Tiki you were probably getting your arse fucked!
sul,
I bought and sold in August as well. I do not buy and hold, I watch the trades all day looking at the volumes and also the bid and offer prices on level 2, I don not use charts. I look at liquidity, spreads and frequency of trades!
robert, once again im a trader not a school teacher. thank go for spell check.
Nice one Joseph. I wonder who bothers doing a spell check of comments! lol
Joseph your grammar is still not making sense as you cannot even use the spellchecker. Go back and read your last comment!
Barclays PLC (BARC:LSE)shares have gone up by 20.95% since I first mentioned it here less than a week ago on October 22, 2011 at 3:00 pm.
This means an extra 20.95% gain on my investment.
As Warren Buffett said,’be brave when everyone is being scared and be scared when everyone is being brave’!
There are a lot of free resources on the internet to help you do your own research and due diligence before picking and investing in stocks.
Never buy snake oil. CAVEAT EMPOR!
Hi Alessio – I notice a difference between the charts of 2008 vs 2011. the weekly 50MA was already pointing down in 2008 but that of the 2011 is flat.
Robert, I could not agree with you more. Doing your research is key to picking a good trade or stock, and I believe more people should be warned about B.S. or snake oil as you rightly call it. Cheers, and keep up the good work. Feel free to come back and I would invite your comments on my future posts too. Alessio
Thanks David for your detailed and insightful comment on my post. Seems you were right on your upward bias and volatility. Hope you managed to make some money from it. Well done.
Hi, I don’t know how to trade. I used to have a portfolio and used to buy and sell stocks, short and long based on momentum. All in all I probably came out even before I started to spend my funds. Now I have too little to risk in these choppy markets.
I do wonder why the markets have not collapsed given that countries and banks are bankrupt and that unemployment is at such high levels. Is it that money has no other place to go than the stock markets? Is it a hedge against hyperinflation.
Regarding the Eurozone issues, I believe that the Germans will do the necessary to save the Euro and avoid financial disaster. They do not want to be blamed for another world crisis again and be reminded of it for another few centuries. Any leader who is interested to leave a legacy will not want the collapse of the financial system on their watch. So, our leaders, once they agree on how, will mend things temporary and put bandage so that it all looks good and on the way to recovery. Time will heal.
If traders short the markets on the fear that there is uncertainty about the Eurozone, they will be disappointed. Markets will drop (or rather the infaltion adjusted value of the markets) when the new round of free printed monies run out.
The petrodollars may be of great help to world economy.
greece is toast
You a still a “Bull” Robert? How’s your BCS (barclays) trade going? Hope you had a tight stop-loss.
yea. i am still very bullish. I sold and bought back five times already, You need to know when to buy and when to sell!