S&P 500 Forecast From August 20, 2012 - Go short on equities or Fear of testing all time high ? (Expected Trading Range: 1278 - 1420)
Aug 17, 2012 - S&P 500 closed today 1418.16 which is about 12 points gain compared to last week close of 1405.97 on Aug 10, 2012. S&P 500 was trading between 1397.32 and 1418.72 which is a swing of about 21 points.
Last Week Analysis - Trading in a narrow range of 21 points and fear towards testing all time high
S&P was trading in a narrow range of 21 points between 1397 and 1418 which is unusal and it shows that market is getting enough fear to cross this boundary. Since the next target would be a testing of all time high for S&P 500 which is also unsual with the current market weak fundamentals. Semi conductors industry would lead the market compared to all other sector and this has been tested many times in the history. Since Marvell Technology Group (Nasdaq:MRVL) is trading near its 52 week low with disappointing sales outlook shows that the entire market would enter into correction zone rather than testing all time high on the index.
US will hold presidential elections on Nov 06, 2012
With respect to US long term treasury prices, TLT closed today at 121.63 which is big loss for this week compared to the last week close of 125.70. However TLT reached its all time high point of 132.21 on July 25, 2012. The upside is very much limited on US treasuries and downside is huge. In the short time, it will go up. So if you are trading on US treasuries in the short term, it is a good time to liquidate your long position on US treasuries.
Last Week Low: 1397.32
Last Week High: 1418.71
If you are a medium or long term conservative investors,
1. Initate short position on US treasuries.
2. Liquidate your long positions on Stocks and convert them to cash (US$)
For Speculators and Intraday Players - Bet on Volatility
CBOE Volatility Index (VIX) closed today at 13.45 today which went down for this week also. The collapse of VIX signals that market does not have any fear and is going to make a powerful upmove. 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. You can consider taking long positios on VIX also.
Only if you are day trader, you can have the following options:
1. Buy 1X OTM call option and 2X OTM put option - Long Strip.
2. Long Stocks and stop loss orders
3. Long Stocks with long put options
Note: OTM - means Outside the money.
Next Resistance Levels:
strong resistance level at: 1413.38 set on April 3, 2012
strong resistance level at: 1400 - crazy market move
strong resistance level at: 1345.02 set on Jul 22, 2011.
strong resistance level at: 1348.24 set by 50 days EMA.
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:
strong support level at: 1317.20 set by 200 Days EMA.
strong support level at 1189.40 set on Nov 26, 2010
strong support level at 1119.46 set on Aug 08, 2011
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 Aug 19, 2012