an tSionna {6.27.10}

Longer term picture that I hope illustrates the point I keep making about trading ranges. Markets phase in and out between trending cycles {which can be bullish or bearish} and trading ranges. There's not enough space here today for me to go into my methodology for determining a trading range. Some of the factors though are money flows into and out of stocks, seasonality, market valuation as well as both the economic and political backdrop.

If you look at the chart above you can see a couple of things:

Bear market collapse in 2007 took a much shorter period of time to resolve itself than either of the bullish trending periods.

Since the market broke out to the upside in 2008, it has spent almost an equal amount of time between trending and range bound cycles.

Resolution to the upside since 2008 has occurred in the latter half of the year.

The economic news looks terrible right now and may only marginally improve over the summer. However, I think there are enough underlying positives that will enable stocks to move higher by the end of the year. While we may go a bit lower over the next couple of weeks, probability suggests that stocks will sort through their issues and cycle back into a bullish trending range either by late summer or early fall.

Of course, just in case, we have the defensive pages of the playbook handy as well!  :-}

*Long ETFs related to the S&P 500 in client and personal accounts.