its all news driven, once the news looses its impact on the psyche the price will move back up sharply since, most everyone knows that key factors will support the market till presidential election. if the bighouses on the street want their GOP lobbying groups still holding influence, the market will be supported. Thats why election cycles are so dangerous for shorts, the flood gates will be left wide open, and any political party that talks about taxes will not be elected. there will be hearings in August by Rangel, so end of July you could see some panic selling premptively. But by year end we test 1600 on the SPX, 14,400 on the DOW, when everyone realizes the world is not ending. In '87 interest rates were around 10%. http://www.fool.com/Features/1997/sp971017CrashAnniversary.htm
Nitro, I agree with almost everything you said here, but I believe you should factor in two additional points: 1: There is long term resistance at the March 2000 highs. The SPX has already failed twice this month at the long term resistance of the March 2000 prior supply area: 1527-1552. 2: This bull market started in March 2003 and is over 4 years running. If you bring up a 4 year chart with monthly candles and the 20 period MA (20 month moving average), use www.bigcharts.com for monthly candles; you will notice that the SPX has pulled back and held support on a closing monthly basis at its rising 20 month moving average each and every year of this bull market except this year. "But, this year isn't over and why should this year be any different?" On the other hand the 200 day moving average has failed to hold support at least 4 times in the past 4 years. This in my opinion makes the 20 month moving average the ultimate support MA for the SPX, because it never fails on a closing monthly basis. In fact you can extend the above chart setup to 10 years and you will notice that the 20 month moving average has acted as perfect support in every bull market in the past 10 years and acted as perfect resistance in the 2000-2002 bear market. Jeff
How many bull markets do you know where the s&p 500 didn't make much higher all time highs? We're at the 2000 high right now.
I am not suggesting that the SPX won't go higher this year. However, healthy bull markets need at least one strong retracement each year before they can advance higher. This clears out the weak hands so there will be a fresh money supply at long term support. Remember the old market timers saying, 'When everyone's bullish, there's no one left to buy." Meaning that everyone is fully invested and there is no side-lined money left.) Strong retracements clear out the weak players. Then when the market hits long term support, smart money starts buying creating a resumption of the uptrend. The weak players jump back in (in fear of missing the next move up), which in turn fuels the prices higher and higher.
smart money players don't retrace it enough to let retail buy in, thats why the size of the retracements have been less and less. And the slope of the trading channels have been increasing at each leg, to a blow out phase.
Jeff, I agree with everything you say. AFAIK, the longer the time period used to compute S/R levels, the more significant in relation to lower time periods, when broken. nitro
Why would smart money sell at all if they think it's going higher? If they only let miniscule retraces happen as you suggest, why would they even let it retrace at all instead of taking advantage of every dip before it was even considered a dip? Or are you suggesting that smart money isn't/doesn't sell? They just control the "retraces" for fun?
they have no choice but to sell, its part of risk management. But they are the first ones to jump in turn it around. After retail is liquidated at the lowest levels.
anyone else coming to the opinion that the asian markets are telling us that they are now the dog and we are the tail? big fat whothefuckcares reaction to drops in the US markets lately. N225 in danger of going positive as i type- in the face of the US declines. thing is, i'm not even surprised. i went into the weekend short HSI (couldn't bear to take a loss @ all time highs on friday- so i roled the dice), and have been nervous about the short because i was afraid that the US didn't drop enough on friday to get noticed in asia. sadly, starting to look like i was right...
So they sell and start buying almost immediately? How much do they sell? How much do they buy? So you think retail is done liquidating at the lowest levels now? Their risk management dictates what exactly? How do you know this? Sorry, but what you're saying is fairly ominous and vague and I don't understand how you have all of this knowledge as to how "smart money" operates and when their buy and sells are triggered and don't understand why they would sell and immediately turn to buy what they just sold only a fraction higher.