An tSionna 3.13.09 Technical Picture From Barrons
Technical picture from Barrons (Excerpt-Bold headings are mine.}
THE QUESTION ON EVERY investor's mind is whether Tuesday's big rally was the start of something bigger. We've seen a few false starts before. But when we weigh the technical evidence, it does seem as if this time it may last for a little while before the bears return....
..A news trifecta Tuesday finally lit the flames. It started with a Citigroup report that it was profitable during the first two months of the year. Then Federal Reserve chief Ben Bernanke said that a recovery later this year is not out of the question and that big banks will not be allowed to fail. To top it off, Rep. Barney Frank said he expects the Securities and Exchange Commission to reinstate the "uptick" rule, a regulation removed last year that allows short sales only if a preceding trade took place at a higher price.
Suddenly, several clouds of uncertainty were lifted off the market. The Standard & Poor's 500 index...has one important hurdle to overcome before the bulls declare a short-term victory....The November low at 741 was a line in the sand for many. So when the S&P 500 fell below it last month, analysts turned their sights as low as 600. If 741 can be retaken, many traders could reverse their selling into buying to add needed fuel to the rally.
In technical parlance, that is called a breakdown failure and as the name suggests, it is bad news for the bears.
For short-term investors, that is good news. If the index can breach 741, I think that 805 is a likely next target. This was where the S&P 500 found short-term support between November and February. And it is also where the trendline drawn from the Jan. 6 interim peak comes into play later this month.
The combination provides a compelling target, but it also provides a good argument for the return of the bears. When several chart features come together to provide resistance, it is a good bet that sellers who missed their chance to sell in February will be back. Supply will trump demand.
That is the short-term view. Looking out to the longer term, I think that the transition period from bear to bull will become more evident if 805 is reached. Whereas the trend over the past 17 months has clearly been down, a nice rally now would confirm that the trend finally is flattening out....That is hardly a view that the market will begin a true bull market. Rather, it is a view that the transition process will continue into its next stage of churning sideways. Many months later, we could expect that churning to turn into a bull market..... As for the long-term picture, there is still far too much technical damage in need of repair before stocks can be bought for the long run.
Suddenly, several clouds of uncertainty were lifted off the market. The Standard & Poor's 500 index...has one important hurdle to overcome before the bulls declare a short-term victory....The November low at 741 was a line in the sand for many. So when the S&P 500 fell below it last month, analysts turned their sights as low as 600. If 741 can be retaken, many traders could reverse their selling into buying to add needed fuel to the rally.
In technical parlance, that is called a breakdown failure and as the name suggests, it is bad news for the bears.
For short-term investors, that is good news. If the index can breach 741, I think that 805 is a likely next target. This was where the S&P 500 found short-term support between November and February. And it is also where the trendline drawn from the Jan. 6 interim peak comes into play later this month.
The combination provides a compelling target, but it also provides a good argument for the return of the bears. When several chart features come together to provide resistance, it is a good bet that sellers who missed their chance to sell in February will be back. Supply will trump demand.
That is the short-term view. Looking out to the longer term, I think that the transition period from bear to bull will become more evident if 805 is reached. Whereas the trend over the past 17 months has clearly been down, a nice rally now would confirm that the trend finally is flattening out....That is hardly a view that the market will begin a true bull market. Rather, it is a view that the transition process will continue into its next stage of churning sideways. Many months later, we could expect that churning to turn into a bull market..... As for the long-term picture, there is still far too much technical damage in need of repair before stocks can be bought for the long run.
Link: {Subscription May Be Required}http://online.barrons.com/article/SB123672544902688261.html
My comment: We are likely still in a secular bear market but evidence seems to suggest it is beginning to become long in the tooth. Also this technical view is the current Wall Street consensus viewpoint. Also it is worth noting that the S&P 500 has reclaimed that 741 number.
*Long ETFs related to the S&P 500.
posted by CR English at 9:13 AM
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