S&P 500 Forecast From Oct 31, 2011 - Perfect time to short the market and cover your short position on US treasuries (Expected Trading Range: 1090 - 1300)
Oct 28, 2011 - S&P 500 closed today at 1285.08 which is 47 points up (3.78%) compared to last week close of 1238.25 on Oct 21, 2011. S&P 500 was trading between between 1221.06 and 1292.66 in the last week.
Last Week Analysis - Euphoria on Europe Bailout Fund of $1.4 trillion contributed short covering rally and panic buying
S&P 500 had very good week of gaining 3.78%.S&P 500 just closed at its 200 days EMA on oct 14 and many investors were treating this level as perfect time to short the market. When Europe bailout fund of $1.4 trillion was approved, entire world market was in euphoria and intraday players and speculators took the long position on stocks. Investors having short position started covering their position with by panic and by margin calls. This would be treated as another bear market rally and it would be a perfect time to liquidate your all long positions and create short positions on equities. Go long on Indian T-Bills and INR. US 30 years treasury prices plunged further this week and it will shoot up in the coming weeks. US treasury is too early to buy and too late to short. US treasuries (Ticker: TLT) would bottom near 100 - 103. TLT closed today at 111.46.
Note: US Interest Rate Bottom retesting will happen again in the coming months.
Last Week Low: 1221.06
Last Week High: 1292.66
If you are a long term conservative investors,
1. It is the time to cover your short position on US treasuries completely and consider switching back to US$. TLT closed today 111.46, eventhough it would bottom near 100 - 103, if you are on the profit side, you can cover your short position. You can initiate long position ono US treasuries, when it started moving below 105 gradually.
2. US Treasury prices collapsed significantly. Still Fed Fed would on QE3 announcement until the yieds are very high and the prices are very low. Front running the Fed is not a good strategy in investment.
3. US$ is only safe heaven. You can invest little portion of your investment on bear funds like FAZ, SKF, QID, etc.
For Speculators and Intraday Players - Short the Market with stop loss or long on long dated OTM Put options
CBOE Volatility Index (VIX) plunged a lot on last week. Still fundamentally the US market is very week due to unemployment and slumping house prices along with US debt downgrade. Always fundamental wins in the long run.
Only if you are day trader, you can have the following options:
1. Buy long dated (OTM) put option - at least one month expiry time.
2. Short the market with stop loss order
3. Short the market with long call option (Hedging)
Note: OTM - means Outside the money.
10 Days EMA: 1246.39
21 Days EMA: 1207.65
50 Days EMA: 1218.93
200 Days EMA: 1243.43
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 1196.07 set by 50 days EMA
strong support level at 1119.46 set on Aug 08, 2011
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 Oct 29, 2011