S&P poised to continue rally?

I haven’t left much doubt that I am in the longer term bear camp.  That said, there are some indications that this rally, senseless as it may seem, could have legs.  Monday’s close of 1210  brings the index to a recent high.  Should it push higher, it would appear to be clear sailing to the 1270 area.  There are two fibonacci retracements just below 1210: 1202 is 23% retracement of 2009 low to 2011 high, and 1208 is 38% retracement of 2011 right shoulder high to August low.

I think it’s also worth noting that the MACD (bottom graph) recently saw a crossover to the upside from very depressed levels.  Though I see little reason for economic optimism, I suspect the market sees enough hope to rally higher.

Looking longer term, I still see the the mid-summer action as a major topping pattern, perhaps a Head and Shoulders.  There could be some resistance around 1235, but really, should the S&P push above 1220, it looks like pretty clear sailing to the 1270 area.  I expect heavy resistance there, should that level be attained.

That’s my .02.  It’s certainly not worthy anything more.

  1. August 30, 2011 at 8:04 am

    I too am in the bear camp, but like you I see the short term movements post Jackson Hole as market pricing in further easing – bouying assets.

    If more QE DOESN’T come… the market sell-off will be steep and brutal.

  2. August 30, 2011 at 8:47 am

    I agree. That said, I think the Fed’s path to QE will be much harder this time than last. For one, prices for gas and food – things that everyone notices – are higher. And QE is broadly blamed for that. And, should the market continue to rally, I expect that resources will once again be the big winners (energy, ag, miners, etc). So it’s a catch-22, the rally itself inhibits the likelihood of QE3, which is what the rally is based on to begin with. I think the economic numbers will need to be truly dreadful for QE3 to make it through.

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