Software & Finance

S&P 500 - May 2011 Technical Forecast - Buckle up for wild swing and steep pull back

Apr 29, 2011 S&P 500 closed today at 1363.62 which is about 2.85% up compared to 1,325.83 on the close of Mar 31, 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. On Apr 18, 2011, S&P its monthly low of 1296.44. Interestingly if you watch this number, it is the 50 days EMA of 1298.91 discussed in my earlier update.

The last two weeks rally correlates with the increasing the negative sentiments towards US$ and inflation. People are happily shorting dollars and creates the commodity bubble of Silver is getting ready to touch 500$. No other option Silver and Gold prices would burst in the coming weeks with panic buying in US dollar.

May 2011 Analysis - Get ready for steep pullback

Let's look the S&P technical levels. S&P 500 is trading well above its 200 days moving average of 1225.94 and above its 50 days EMA of 1317.93. 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.

Even if you are day trader, you may consider taking both long and short position by betting the market volatility.

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 1343.17
21 Days EMA 1332.48
50 Days EMA 1317.93
200 Days EMA 1225.94

Next Resistance Levels:

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 1317.93 - 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 May 01, 2011