Software & Finance

S&P 500 - Apr 2011 Technical Forecast

Mar 31, 2011 S&P 500 closed today at 1,325.83 which is almost flat compared to 1327.22 on the close of Feb 28, 2011. S&P closed above its 10, 21, 50 and 200 days EMA and giving us a strong bull signal.

S&P 500 has started experiencing a little pull back in the first two weeks of Mar 2011. But due to Unexpected Japan Earthquake and poisonous nuclear radiation leaking, world markets including US Market was in panic selling for about a week. This is totally an unexpected event. When these kinds of event occurs, if often leads to panic selling followed panic buying on short covering rally. This rally can be correlated with Newton's Third Law of Motion - (For every action, there is an equal and opposite reaction). Deep Panic selling triggered a huge rally. Now S&P 500 is retesting its 52 weeks high 1344.07.

With US unemployment rate (Seasonally Adjusted) remains at 8.9% in Feb 2010 and declining home prices, double dip is inevitable for US in the long term. Fed can not keep the rate low for a long time. When they start increasing the rate, home prices will go down further and it would trigger a new wave of foreclosures. Already we get news about the foreclosures in the mainstream media.

April 2011 Analysis - Do not trust this rally

Let's look the S&P technical levels. S&P 500 is trading well above its 200 days moving average of 1215.85 and above its 50 days EMA of 1298.91. It gives a (wrong) bull signal on S&P 500 to go long.

Still Market is holding its level close to annual high because of its strong technical support. Speculators and Day Traders are hesitating to short the market because of technical support.

No matter what the number would be in US unemployment report, market may go up a little to catch or test its 52 weeks high and it will continue its correction phase. Otherwise as soon the report is released, even the numbers are very good, market will turn into RED. In either case, it is good time to take short positions on US stock market.

Only if you are day trader, you may consider taking a long position with tight stop loss.

If you are a long term risky player in the market, then you can initiate short position and accumulate short position gradually in the coming weeks. You can not expect return in the short term. You can short the entire market or go long on leveraged bear funds or consider shorting Silver (Short SLV or Long ZSL)

If you are a long term conservative investors, then you have to switch your investment strategy and move on the Fixed Income Securities - Govt. Bonds, US Long dated Treasuries (TLT), US Dollar (UUP), etc.

Technical Indicators

10 Days EMA 1311.87
21 Days EMA 1307.60
50 Days EMA 1298.91
200 Days EMA 1215.85

Next Resistance Levels:

strong resistance level at: 1344.07 set on Feb 17, 2011
strong resistance level at: 1386.95 set on Mar 16, 2007
strong resistance level at: 1433.06 set on Aug 03, 2007
strong resistance level at: 1440.70 set on Nov 23, 2007
strong resistance level at: 1453.55 set on Sep 07, 2007
strong resistance level at: 1,530.23 set on May 30, 2007 (first closing high after dot com bubble)
strong resistance level at: 1,552.87 set on Mar 24, 2000 (all time high during dot com bubble)
strong resistance level at: 1,565.15 set on Oct 09, 2007 (all time high during housing buble before sub prime crisis)

Next Support Levels:

minor support level at 1298.91 - 50 Days EMA
strong support level at 1189.40 set on Nov 26, 2010
minor support level at 1064.59 set on Aug 27, 2010
strong support level at 1022.58 set on Jul 02, 2010
strong support level at 1036.18 set on Oct 30, 2009
strong support level at 946.21 set on Jun 12, 2009
strong support level at 827.37 set on Sep 27, 2002
strong support level at 683.38 set on Mar 06, 2009
strong support level at 638.73 set on Jul 19, 1996 - Might see this number again when completing double dip bottom

Posted on Mar 31, 2011