S&P 500 Forecast From Jun 04, 2012 - Market to bounce back from oversold condition (Expected Trading Range: 1277 - 1348)
Jun 01, 2012 - S&P 500 closed today at 1278.04 which is about 40 points down compared to last week close of 1317.82 on May 25, 2012. S&P 500 was trading between 1277.25 and 1334.93 which is a swing of 58 points.
Last Week Analysis - No more rally for US Treasuries
Every day news coming out from Euro Zone created a huge panic in the market. As expected Facebook continued its slide and closed today at 27.72 with the P/E ratio of 88.7X. Even though P/E is down compared to its IPO value, still it is huge for social media company. If Facebook did not do well in the next quarter, then it will erase at least 50% of its value and will put FB to trade near teens.
US treasuries enjoyed a powerful rally this week and the interest rate reached a low point of more than 60 years. Everyone wants front run the Fed by taking long positions on US treasuries. Fed is not going to buy at high price on its long dated securities. They will make an announcement for QE but when they are going to buy back US treasuries are completely upto US treasury department. They may buy after 3 or 6 months. The most disappointed ameatur investors will exit from long position on US treasury securities. Hence the price collapse of US treasuries inevitable.
US will hold presidential elections on Nov 06, 2012
With respect to US long term treasury prices, TLT closed today at 130.36 which has crossed the doube top of its 52 weeks high point of 125.03. It is the perfect time to initate short position US treasuries. The upside is very much limited on US treasuries and downside is huge. Note that TLT gained 5.64% in the last 3 trading sessions which is huge and historical event.
Last Week Low: 1277.25
Last Week High: 1334.93
If you are a medium or long term conservative investors,
1. Initate short position on US treasuries.
2. Since S&P 500 went below its 200 days EMA after a long time, the stock market rally is imminet. So you can go ahead cover all of your short position and initiate long position on US equities.
For Speculators and Intraday Players - Long Stocks with Stop Loss Orders and Long Options Strap
CBOE Volatility Index (VIX) closed today at 26.66 today. Before VIX reaches 40, it has to go down first before it moves up. It is also good idea to liquidate your long positions on VIX. 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 2X OTM call option and 1X OTM put option.
2. Long Stocks and stop loss orders.
3. Long Stocks with long put options
Note: OTM - means Outside the money.
10 Days EMA: 1313.26
21 Days EMA: 1329.81
50 Days EMA: 1348.67
200 Days EMA: 1302.95
Next Resistance Levels:
strong resistance level at: 1345.02 set by Jul 22, 2011.
strong resistance level at: 1348.67 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: 1302.94 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 Jun 02, 2012