The bear market signal is still 100% alive, absolutely no change from December if you look at the SPX monthly chart. The 10 month moving average (blue line) is still acting as resistance (a long term bull/bear marker) and is still lower than the 20 month moving average (green line). Unless bulls manage a month of May close above 1438, there is no reason to be long stocks at this point, other than helping major firms clear inventory at these levels and at your expense. Key support is now 1404/1405, April high. With equity put to call ratios in lala land levels of optimism, the path of least resistance is down, not up.
Extending the chart to 1995, we can see that the last three months follow a pattern not seen since the end of 2000. It could be different this time, but I would let someone else risk their money trying to find that out. It's also troubling to hear the constant drumbeat of pundits and reporters naming this recession a mild one before it even kicks in. Bulls need a wall of worry, not an endless horizon of complacency.
By the way, the March low of 1255 is an exact 23.6% retrace (a standard measure in charting) off the 1987 crash low and last year's all time high (216/1576). This could be a clue as to what the wizards behind the curtain are working with. Should we lose that level without making new all time highs, the next long term level of support is 38.2% at 1056.71 and for those Armageddon readers, 50% at 896.72. Just a thought.
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on Tuesday, May 20, 2008 at 5/20/2008 08:36:00 AM.
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