S&P 500 Index Analysis

Nov. 3, 2010

Analysis:

Yesterday's Analysis predicted that "the Factory Orders will be healthy, and the ISM Non-manufacturing Index will bring a positive surprise." Today the Factory Orders saw a healthy 2.1% increase, and the ISM Non-manufacturing Index was better than consensus. The fact that the market did not sell off in the wake of the Fed QE2 sets up the stage for a further upward movement. Looking ahead to tomorrow, the Initial Jobless Claims will be close to 440,000. Technology stocks led by Qualcomm and industrial stocks led by automakers will propel the market to close above 1,200.

Strategy:

Hold long at 1,160
 
Quote from DrChen:

Nov. 3, 2010

Analysis:

Yesterday's Analysis predicted that "the Factory Orders will be healthy, and the ISM Non-manufacturing Index will bring a positive surprise." Today the Factory Orders saw a healthy 2.1% increase, and the ISM Non-manufacturing Index was better than consensus. The fact that the market did not sell off in the wake of the Fed QE2 sets up the stage for a further upward movement. Looking ahead to tomorrow, the Initial Jobless Claims will be close to 440,000. Technology stocks led by Qualcomm and industrial stocks led by automakers will propel the market to close above 1,200.

Strategy:

Hold long at 1,160
More...

This analysis seems weak. Technically we're not busting 1200 despite repeated attempts. Every reason to rally this week was refuted. Many stocks appear ready to sell off.

I'm predicting a sell off within days back to 1140 or 1150. Risk reward on holding long on index is not good anymore. If you must go long, go long technology stocks not the whole index.
 
Nine Ender,

Thank you for contributing your analysis.

You stated that "technically we're not busting 1200 despite repeated attempts." I am not able to draw the conclusion that 1,200 is a resistance other than that it is a round number, so I am not able to predict a market reaction below 1,200. However, I do not dispute your analysis that the market will reverse at some point in the future. My current Analysis only predicts that the market is not there yet. Thanks.

Dr. Chen
 
Quote from Nine_Ender:

This analysis seems weak. Technically we're not busting 1200 despite repeated attempts. Every reason to rally this week was refuted. Many stocks appear ready to sell off.

I'm predicting a sell off within days back to 1140 or 1150. Risk reward on holding long on index is not good anymore. If you must go long, go long technology stocks not the whole index.
More...

I agree. Sell off is around the corner.
 
Nov. 4, 2010

Analysis:

Yesterday's Analysis observed that "the fact that the market did not sell off in the wake of the Fed QE2 sets up the stage for a further upward movement," and predicted that "technology stocks led by Qualcomm and industrial stocks led by automakers will propel the market to close above 1,200." Yesterday's market did set up the stage for today's impressive market movement. Both Qualcomm and Ford settled more than 4% higher today, and the market closed above 1,200. Looking ahead to tomorrow, the overall employment increase will be lower than 60,000, while the payroll increase will be slightly higher than 80,000. The market has become over-bought and will find it hard to march higher.

Strategy:

Offset long at 1,213 for a profit of 53 points; sold short at 1,213.5.
 
Nov. 5, 2010

Analysis:

Yesterday's Analysis predicted that "the market has become over-bought and will find it hard to march higher." Today despite impressive employment increases in Oct., the market edged a few points higher in a range day. Looking ahead to next week, the market will consolidate with a bias towards 1,200, since it never traded in that area. The news that will weigh on the market will be the continued concern on the impact of delayed foreclosures on banks' balance sheets and the weakening Euro due to peripheral European nations' debt woes.

Strategy:

Hold short at 1,213.5
 
Nov. 8, 2010

Analysis:

Friday's Analysis predicted that "the market will consolidate with a bias towards 1,200" after being weighed by "the weakening Euro due to peripheral European nations' debt woes." Today the market traded in a seven-point range that never closed the gap from Friday's close, as the market was dragged down by the weakening Euro due to concern about Ireland's debt. Looking ahead to tomorrow, the market will continue to drift downwards, as the market works off the frothy expectations built up in the wake of last week's congressional election and the Fed's QE2.

Strategy:

Hold short at 1,213.5
 
Nov. 9, 2010

Analysis:

Yesterday's Analysis predicted that "the market will continue to drift downwards." Today the market settled almost 10 points lower. Looking ahead to tomorrow, the International Trade Deficit for Sept. will decrease sharply due to a weak dollar and, along with the Initial Jobless Claims below 450,000, will further boost the dollar against the Euro. The Euro will also weaken because Olli Rehn attempted to jawbone the market into renewing its faith in the Irish bonds, while unlike voters, the market is not easily being fooled by politicians. As a result, the market will attempt to retrace back below 1,200.

Strategy:

Hold short at 1,213.5
 
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