A Bigger Perspective Unfolding
While the summer vacation spirit wants to prevail, the magnitude of the stock market rally over the past week changes a lot of things over the long period. No longer are we looking for a summer trading range or a decline that will find a bottom in the S&P 760 area. To us this is setting up a much more serious situation that we will want to position ourselves in a much more aggressive manner.
While history never repeats, from a technical standpoint the weekly S&P charts provide a plausible scenario when one looks back at 2002. The timing is pushed back compared to that year, when the January highs were tested and failed in March and the market made a gradual decline towards the lows in October 2002. This year we see the highs being tested in July and the probable lows will be pushed back to the First Quarter of 2010. From our viewpoint we are anticipating that those lows will be the lows for the 2000 to 2017 long cycle and will be in the area of 500 to 550 on the S&P. What is different compared to 2002 is that the Nasdaq 100 was the weak sister then, while in 2009 it is the strong sister and a harbinger of the market leader over the next long cycle.
These are just some first thoughts, we will put more meat on this perspective in the coming days/weeks, but will be holding our current positions and watching for the S&P’s to rollover somewhere between 940 and 975 over the next two weeks. All the charts are set for the turnover now, one just waits for the event. If we had to guess it will be that some form of Health Care Reform will evolve that will scare the H out of the conservative fat cats. Anything that is good for the Commonwealth is perceived as being bad for the Greedy.