If you did read my 6/2/2010 and 7/11/2010 posts, you know I lean on bear camp. I highly suggest you read those posts again, especially you, your friends, your relatives and the one you love are holding a large amount of stocks. You should use this rally to lighten your holding. This may be your last and only chance to sell your stocks before the second phase bear market come into sight.
The best case for the extent of this current rally based on price and time symmetry, would be the 1140 which is the 61.8% retracement level from the 1010.91 low to 1219.80 high, and the time frame being no later than 8/20 before a significant decline into the Sept-Oct period. The next decline could easily reach the 950-940 zone.
I will wait until market hit 1140-1150 before open my short position although the next resistance 1131 may act as a short term cover, I still believe the momentum will push it to 1140-1150.
For you convenience, I paste the July,11 and June,2 posts below, hope you can learn/earn from it.
Sunday, July 11, 2010
My long term perspective of this market
S&P was up 7.71 points last Friday. The momentum of last week rally let me believe that the S&P 1010 is our temporary low. I spent some time on weekend to analyze the charts and review the Dow Theory. I found out the recent low at 1010 could be the first down leg of the second phase of this bear market.
There are some criterion need to be fulfilled before the Phase II of the ongoing secular bear market will execute. First of all the market have to make an advance into a secondary high below prior high 1220, secondly, we need to break the secondary low which I believe it's the 1010 we saw last week.
If I am right with the above analysis, then we are entering a short term bull market provided the market hold 1010, that mean the market is heading toward the fibonacci retracement level from the high of 1220 to the recent low 1010. The 38.2%, 50%, 61.8% and 78.6% fibonacci number are 1090, 1115, 1140 and 1175.
And I believe the market will go up to 1140 or 1175 with five Elliott wave and that three peak of the wave are at 1090, 1115 and 1140/1175. The market will only reach 61.8% fib level 1175 if the momentum is on extreme mode. In the mean time, I doubt the market can go that far, well, I will keep my eyes open and see how the market climb.
I also predict the duration of this counter rally will be 20 to 30 days. By mid to end of August, if you see the market at the extreme overbought level, feel free to lighten your long position, aggressive trader may start shorting this market if all the technical indicators show unanimous direction.
Friday S&P500 closed at 1077.96, I would like to wait for at least 1082- 1085 before start shorting this market again. If you are patient enough, you should wait for the 38.2 fib 1090 or critical resistance 1100.
All in All, today I just want to share my analysis of this market. I may not accurate with this prediction, actually we shouldn't predict the market, but if I am right, at least some long term investors can escape the second phase of this bear market.
Wednesday, June 2, 2010
Where the market is heading in longer term?
S&P 500 today up 27 points, the next resistance will be the 200 days moving average which is 1105.62, after that we have a gap to fill at 1115-1120. Be very careful and alert to watch the market at this point, see if it wants to rise or sink.
Today I am going to talk about the bull and bear situation because I think many people are confused at this time with the direction of the market.
Based on the longer-term phasing and valuation aspects, I belief that the advance out of the March 2009 low has been a bear market rally. Based on my analysis and the data at hand today, I believe that this rally will ultimately prove to be a much longer-term bear market. Historically, Phase II declines are the most devastating and it is my belief that once this bear market rally has run its course, the Phase II decline will be far worse than what was seen between October 2007 and March 2009.
The market also start a traditional bullish primary trend change with the advance up out of the 2009 Phase I low, and I believe that bullish primary trend change is currently still intact. However, I think that the advance out of the March 2009 low has been crippled and obviously the events seen in May were not good.
The last three rally we have seen in May, 21, 25, 27 and yesterday are below average volume, we have to be more cautious when we want to get back to this current market. Yes, the market is oversold right now, but if the confidence of the market is down and lack of buying, it will stay at oversold area for a long period of time. And I deeply believe that the second wave of banking trouble is going to start. At that time, the phase II down leg will be in full force. I will suggest you to lighten your portfolio in each market rally from now on so as to avoid to be the next bear market victim.
In seasonal point of view, you may not want to put a heavy weight on bear at this time because June and July are not the worse months, you may want to wait for August through October. Therefore, if the market sell off to the support I mention yesterday which is the 80 weeks moving average S&P 990 with extreme fear and capitulation mode, you may want to add up your portfolio.
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