Friday, May 14, 2010

My Thoughts on the Market

I feel we are in a secular bear market just like 1929-1949 and 1965-1982 where the stock market traded in a range and didn't consistently make new highs. I also believe that if the US government keeps printing money and bailing out people then we could end up like Japan where the stock market stays depressed for two plus decades. The current secular bear market started in 2000 after the dot com crash and is still running its course presently. We are currently in a cyclical bull market during a long term secular bear market fueled totally by the Federal Reserve Bank via the bailout plans.
The S&P 500 stock market index made a high on October 9th, 2007 at 1565 and made a low on March 9th, 2009 at 676. The total decline was 889 points or roughly 57%.
Using Fibonacci retracements which are a very popular tool among technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the thirteenth century. However, Fibonacci's sequence of numbers is not as important as the mathematical relationships, expressed as ratios, between the numbers in the series. In technical analysis, Fibonacci retracement is created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels. Using the Fibonacci method would give you potential price targets of a 23.6% retracement at 886, a 38.2% retracement at 1015, a 50% retracement at 1120, and a 61.8% retracement at 1225. The S&P 500 has topped at roughly 1220 on April 26th, 2010 which is roughly a 61.8% retracement. Only time will tell if the market moves higher than 1220. I'm not opptomistic. I think the market stays highly correlated to the price of crude oil and the dollar index over the long term. Attached below is the hyperlink to the Chart of the S&P 500.

http://finance.yahoo.com/charts?s=%5EGSPC#chart3:symbol=^gspc;range=6m;indicator=psar+bollinger;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

4 comments:

Trader Bob said...

Leon don't ever question my methods and say I'm full of it period.

Trader Bob said...

IF you didn't know me you wouldn't understand the concept of turnover or the basis for lending. Stege owns you.

Trader Bob said...

Leon show some intelligence when entering my domain

Alex Jones said...

Fibonnacci is a SBRWL. You should move to Maine. The state Republican party platform includes elimination of the Federal Reserve. It is only through the stabilizing force of the Fed that pure capitalism doesn't destroy our economy and stable society. Check out this link
www.outcampaign.org

GFY, HBB