S&P 500 Forecast From July 30, 2012 - Bear Market Rally Since US Treasuries Topped? (Expected Trading Range: 1278 - 1400)
July 27, 2012 - S&P 500 closed today 1385.97 which is a strong gain of 1.71% compared to last week close of 1362.66 on July 20, 2012. S&P 500 was trading between 1329.24 and 1389.19 which is a swing of 60 points.
Last Week Analysis - Saving of Euro Triggered Bear Market Rally
US Treasuries (TLT) topped 132.21 by mid of last week and this created no room for treasuries to rally further. On Thursday July 26, 2012, comments from Mario Draghi, President of European Central Bank during the conference at the Olympics, helped to push the US and Euro Markets higher. It is considered as a short covering rally and bear market rally. There is no true signs of growing economy.
There is a big disappointing earnings and outlook from facebook, sent its stocks intra-week lower to 22.28. But still FB is overvalued and its fair value should be around 5 dollars. Even after plummeting by close to 40% from its IPO price of 38, its P/E ratio is at 127.02. We can expect Facebook to trade in teens very soon, with in the next quarter.
US will hold presidential elections on Nov 06, 2012
With respect to US long term treasury prices, TLT closed today at 128.48 which is little loss for this week compared to the last week close of 130.4. However TLT reached its all time high point of 132.21. It is the perfect time to initate short position US treasuries. The upside is very much limited on US treasuries and downside is huge.
Last Week Low: 1329.24
Last Week High: 1389.19
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 around 16.70 today which is near flat for the week. 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.
10 Days EMA: 1359.04
21 Days EMA: 1353.72
50 Days EMA: 1348.24
200 Days EMA: 1301.60
Next Resistance Levels:
strong resistance level at: 1400 - crazy market move
strong resistance level at: 1345.02 set by 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: 1301.60 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 Jul 29, 2012