Market March Madness
Posted by Gregory Guest at 3/19/2010 11:59 AM 
Categories: Market Updates
Tags: secular bear market technical resistance bear market sell stock stock market secular bear stock market commentary
Categories: Market Updates
Tags: secular bear market technical resistance bear market sell stock stock market secular bear stock market commentary
Market Update 2010-03-19
Contributed by Charles Guest, SinoCentury Guest Commentator
It’s time to turn off the NCAA tournament and watch CNBC, the most exciting game in town at the moment. I believe the stock market game is getting more interesting by the day and you better play it right. As you all know by now, I have long been of the opinion we remain in a long term secular bear market. With debt at 370% of gross domestic product, I do not believe there is any long term recovery of the market in sight. I believe the huge run up since March 9, 2009 was a normal correction within an on-going bear market. I was buying during the most recent down leg in late 2008/early 2009 and that has paid off handsomely. I began taking profits in August 2009. I am still in the market, but I have raised considerable cash to prepare for the next leg down.
So how am I playing this game now? I am watching the behavior of the S&P 500 at the 1150 level. The market has traded very narrowly around this level for about a week now. Why is this? The reason is that the 1150 level was first reached in January of this year and then followed by a correction to the 1057 level in February. The 1150 level is now resistance. 1150 is also important for another reason. It could be argued that it represents a 50% Fibonacci retracement from the October 2007 high to the March 2009 low (Fibonacci retracements are key technical levels used by traders. For more info, click here.). The more precise 50% retracement level is 1120, but 1150 is close enough for government work. If the market can not clear this level and stay above it, then we will have completed a double top, which would be a very ominous sign. How low could we go? I don't really know, but there is a chance that we could go to a new low below the S&P 500’s closing low of 677 that we saw last March. However, if we can clear above the 1150 level there is no further resistance until the 1225 level, which would indicate a 61.8% Fibonacci retracement from the March 2009 low. That would represent an even more important resistance level of major proportions. So here is my strategy. If I had not already raised significant cash, I would do so now. Having already raised cash, I will raise more if and when the S&P 500 approaches 1225 points.
So, turn off the NCAA tournament and tune into the more important game being reported on CNBC. And as usual, we will know more later.
Contributed by Charles Guest, SinoCentury Guest Commentator
It’s time to turn off the NCAA tournament and watch CNBC, the most exciting game in town at the moment. I believe the stock market game is getting more interesting by the day and you better play it right. As you all know by now, I have long been of the opinion we remain in a long term secular bear market. With debt at 370% of gross domestic product, I do not believe there is any long term recovery of the market in sight. I believe the huge run up since March 9, 2009 was a normal correction within an on-going bear market. I was buying during the most recent down leg in late 2008/early 2009 and that has paid off handsomely. I began taking profits in August 2009. I am still in the market, but I have raised considerable cash to prepare for the next leg down.
So how am I playing this game now? I am watching the behavior of the S&P 500 at the 1150 level. The market has traded very narrowly around this level for about a week now. Why is this? The reason is that the 1150 level was first reached in January of this year and then followed by a correction to the 1057 level in February. The 1150 level is now resistance. 1150 is also important for another reason. It could be argued that it represents a 50% Fibonacci retracement from the October 2007 high to the March 2009 low (Fibonacci retracements are key technical levels used by traders. For more info, click here.). The more precise 50% retracement level is 1120, but 1150 is close enough for government work. If the market can not clear this level and stay above it, then we will have completed a double top, which would be a very ominous sign. How low could we go? I don't really know, but there is a chance that we could go to a new low below the S&P 500’s closing low of 677 that we saw last March. However, if we can clear above the 1150 level there is no further resistance until the 1225 level, which would indicate a 61.8% Fibonacci retracement from the March 2009 low. That would represent an even more important resistance level of major proportions. So here is my strategy. If I had not already raised significant cash, I would do so now. Having already raised cash, I will raise more if and when the S&P 500 approaches 1225 points.
So, turn off the NCAA tournament and tune into the more important game being reported on CNBC. And as usual, we will know more later.
Very insightful commentary on the market. Hope to hear more from you and Gregory in the coming days.
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