"In terms of the S&P 500 index – the 100-wma (25-month for this chart purpose) crosses at 998; this in the past has proven its merit as a very important level to larger trading moves. If a weekly close is obtained above this level…then we would expect a very sharp rally towards and S&P 500 level of 1150-1200. This is the range where the 45-month moving average crosses and it most certainly would not be accompanied by a marked improvement in the economy – but an increase in the “animal spirits” psychology and will be further accompanied by disbelief.
We have not changed “our colors” in terms of the bearish argument, but for the next several months we have. Our fundamental reasoning stems from simply asset reallocation – the bond market more than likely put in historical yield lows several weeks ago, with the resulting rise in yields causing all manner of capital to flow to stocks…this is being seen in Japan, Europe and the US – and will result in higher equity prices. Especially so given managers “have to” put the money to work. But as always…the result will end up creating a larger top of magnitude – and then we shall return to the short perspective.
Thus, the equity markets are very near a critical juncture – either they break above resistance and continue higher…or find resistance and turn lower. Our “bet” is obviously on the former rather than the latter, but we must prepare for the latter case to assert itself, and we shall further be nimble in our trading. We shall not hesitate to reverse positions once again. Be prepared."
cumps
Scuba
Fear blind us opportunity, greed blind us the danger
Short-Term Bull, Long-Term Bear por Richard Rhodes
Scubawarrior
73
07-07-2003 15:25
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