S&P 500 Index Analysis

Discussion in 'Index Futures' started by DrChen, Aug 27, 2010.

  1. DrChen

    DrChen

    Aug. 27, 2010

    Analysis:

    Today the S&P initially acted strangely, and it is most puzzling when it dropped sharply after 10 a.m., perhaps having to do with Intel's ill-timed announcement at 9:58 a.m. The better than expected downwardly revised Q2 GDP to 1.6% provided a sound backdrop for the Bulls to start with, and Chairman Bernanke's comments at 10 a.m. gave assurance to the much battered Bulls, so the market never looked back after a brief swoon at 10 a.m. Now that the market has bottomed out from the 1,040 area, it will continue to build on the upward momentum on Monday.

    Strategy:

    Hold a long position with a limit order to reverse at 1,082
     
  2. DrChen

    DrChen

    Aug. 30, 2010

    Analysis:

    True to previous day's analysis, the market built on Friday's gain to top 1,072 overnight before fading prior to the market open today. The conventional wisdom is that the market sold out on the news of a meager personal spending in July, but the sell-out seems to have been overdone, especially in light of the continuing wave of mergers which the market largely ignored today. Looking ahead tomorrow, barring the scenario of a dip of Consumer Confidence Index below 50, the Chicago PMI will likely surprise on the upside around 59, which will provide much needed confidence booster for the market to recoup all today's losses.

    Strategy:

    Hold long to reverse at 1,082
     
  3. DrChen

    DrChen

    Aug. 31, 2010

    Analysis:

    The market initially did what yesterday's analysis predicted. As the Consumer Confidence Index did not slip below 50, and the Chicago PMI was marginally better than consensus forecast, the market did take off after 10 a.m. But the market's rise was checked when the FOMC meeting minute was released at 2 p.m. and finished the day flat. After the last seven trading days the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040. Looking ahead to tomorrow, the PMI will likely surprise on the upside, which will prod the market higher, but any rise will be checked and partially offset by the Construction Spending release.

    Strategy:

    Hold long to reverse at 1,080
     
  4. Marcell

    Marcell

    Thanks for your analyses, very insightful! So your 1080 target would perhaps create the following scenario? See attachment.
     
    • spy.gif
      File size:
      7.5 KB
      Views:
      414
  5. DrChen

    DrChen

    Marcell,

    Thank you for your comment and attached chart. Since your sentence ends with a question mark, I assume that you were asking me that question. I am sorry to say that I do not know what path the market will take to reach 1,080. I respect you and your opinion expressed in your attached chart, but I simply do not know how the market will behave in the next three trading days. (In fact, the market condition tomorrow could be so dire as to warrant offsetting the existing position. The analysis is made based on today's market condition.) Thanks.

    Dr. Chen
     
  6. DrChen

    DrChen

    Sept. 1, 2010

    Anaylsis:

    On August 30 the Analysis predicted “the market to recoup all today’s losses” the following day, which was yesterday. The market did not recoup all the losses yesterday, but did so convincingly today. On August 31 the Analysis predicted that “the PMI will likely surprise on the upside, which will prod the market higher,” and today the PMI did surprise on the upside and propelled the market higher after 10 a.m.

    The market opened higher, ostensibly driven by the marginally higher manufacturing PMI reading out of China overnight, but the real reason is what the Analysis remarked yesterday, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040.” Once the manufacturing PMI was released at 10 a.m., the market released all the pent-up force against the Bears. Today’s rally clearly is a short-covering rally, because the market completely ignored any negative news, as the worse-than-forecast Construction Spending did no damage to the Bulls.

    Looking ahead to tomorrow, the Jobless Claims will not be a surprise in either direction. Chairman Bernanke will use a speech opportunity to dispel any market doubt on the FOMC’s willingness to act in unity if another round of QE is needed, but he will also signal that no such action is imminent. His speech will drive the market to open higher until the Pending Home Sales Index one hour later reminds the Bulls of the economic reality in contrast to today’s euphoria. The market will test the resistance in the 1,080-1,084 area but should close lower when Friday’s judgment-day mentality sets in.

    Strategy:

    Long stopped out at 1,075; sold at 1,080
     
  7. DrChen

    DrChen

    Sept. 2, 2010

    Analysis:

    Today the Initial Jobless Claims came in as no surprise, as the Analysis predicted yesterday, but the Pending Home Sales Index was better than the consensus forecast, which gave the market the reason to rise.

    Tomorrow is the Judgment Day -- to the Bulls, to be precise, and the Bears' trump card is the Employment Report. The Employment Report will likely surprise on the downside that will at least wipe out all today's gain if the private payroll increase is in the positive 20,000s, and there is some probability that the number may come in negative, which will set the tone for the Sept. market to plunge below 1,040. The ISM non-manufacturing index will likely surprise on the upside, but that will not save the Bulls from the disappointing private payroll number.

    Strategy

    Hold short at 1,080
     
  8. Dr Chen --I appreciate your daily analysis. I hope it continues
     
  9. DrChen

    DrChen

    devilfishlane,

    I will continue to post the daily analysis. Thank you for your thoughtful comment.

    Dr. Chen
     
  10. DrChen

    DrChen

    Sept. 3, 2010

    Analysis:

    Yesterday's Analysis is proved exactly the opposite. The private payroll surprised on the upside, and the ISM non-manufacturing index surprised on the downside, which did "not save the [Bears] from the [cheering] private payroll number." Looking ahead to next week, the market will likely build on the current upward momentum, but given the magnitude of the rise in the last four trading days, it may well drop due to profit-taking.

    Strategy:

    Offset short at 1,083
     
    #10     Sep 3, 2010