S&P 500 Index Analysis (12/27/2010)

Analysis:

Many signs point to an overly optimistic market. VIX has dropped to the lowest since April 12, and the 10-day average of the CBOE's equity put/call ratio has stayed below 0.5 for eight consecutive days. However, the CBOE's Implied Correlation Index has risen steadily over the past two weeks, boding ill for an upwardly trending market. Although the market has overlooked many negative factors in the economy, the events that will trigger a reversal is difficult to predict.

Strategy:

Hold short at 1238.55

S&P 500 Index Analysis (12/21/2010)

Analysis:

Today the market continued its upward trend. However, the RSI has risen above 70 and is indicating a short-term correction due to an overbought condition.

Strategy:

Hold short at 1238.55

S&P 500 Index Analysis (12/20/2010)

Analysis:

Today's market continued to creep higher in an otherwise uneventful day. Looking ahead to tomorrow, the market will test the 1,250-1,251 resistance but will trade in a range.

Strategy:

Hold short at 1238.55

S&P 500 Index Analysis (12/17/2010)

Analysis:

Yesterday's Analysis predicted that "the cross current of economic news from the US and Europe will continue the tug of war between the Bulls and Bears." Today the market traded in a range and finished slightly higher. Looking ahead to next week, the market will be vulnerable to a downward correction, since all the bullish news this week failed to push the market above 1,251, and any negative news from Europe will cause the market to drop towards 1,228-1,230.

Strategy:

Rolled over short -- long Dec. at 1,243.40 and short March at 1,238.55

S&P 500 Index Analysis (12/16/2010)

Analysis:

Today's economic statistics continued the recent upbeat trend, and the market rose as a result. Looking ahead to tomorrow, the market will trade on technical signals, as the cross current of economic news from the US and Europe will continue the tug of war between the Bulls and Bears.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/15/2010)

Analysis:

Yesterday's Analysis predicted that "the Empire State Manufacturing Survey will be positive to the market, but the market will retreat on concerns about the impact of higher long-term interest rates." Today the better-than-expected Empire State Manufacturing Survey initially drove up the market, but the market settled lower while the interest rate on the T-note rose to 3.53%.

Looking ahead to tomorrow, the lack of demand in the Spanish bond auction will rekindle the concerns about European sovereign debt, this time that of Europe's fourth largest economy, causing the Euro to weaken towards $1.31. The Housing Starts will be no greater than 545,000 due to increases in mortgage interest rates. The Initial Jobless Claims will reverse the recent downward trend and rise towards 430,000. The Philadelphia Fed Survey will decrease from 22.5 in October. As a result, the market will continue its slide towards 1,228.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/14/2010)

Analysis:

Yesterday's Analysis predicted that "once the market rises to as high as 1,245, it will drop." Today the market rose above 1,245 but finished only slightly higher. Looking ahead to tomorrow, the Empire State Manufacturing Survey will be positive to the market, but the market will retreat on concerns about the impact of higher long-term interest rates on banks' ability to lend and increase their loans and on homebuilders.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/13/2010)

Analysis:

China did not raise interest rates as widely expected, and global equity market rallied -- except the S&P 500 Index, which gave up all its gain at the end of the session. Looking ahead to tomorrow, Retail Sales and Business Inventories for Nov. will both exceed consensus forecasts. However, once the market rises to as high as 1,245, it will drop due to profit-taking amidst concerns of a near-term top. Perhaps a wishful thinking is all a Bear is left, or perhaps Santa will grant the Bear his wish for this Christmas.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/10/2010)

Analysis:

Today's market action made yesterday's Analysis look more like the writer was talking about his own book than he was making an objective analysis. Looking ahead to Monday, now that China's November inflation rate was 5.1%, China will raise its interest rate before the market opens. Since the market has not discounted such an event, it will retreat, and once it drops below 1,228, the sell-off will intensify until 1,220.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/9/2010)

Analysis:

Yesterday's Analysis predicted that "the market will trade in a range as its breakaway from 1,228 is checked by lingering concerns about European economic strength and China's imminent tightening of monetary policy." Today the market traded in an eight-point range and settled higher. Looking ahead to tomorrow, the International Trade deficit will widen to $45 billion, caused by rising consumer demand and higher crude oil prices, and Consumer Sentiment will drop to 71 due to continued slump in home values. China's central bank will increase interest rate in the next seven hours in an attempt to curb rising inflation, which event the market has not fully discounted. As a result, the market will retreat while the dollar continues to strengthen against the Euro.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/8/2010)

Analysis:

Today the market dropped only to 1,219 before bouncing back to finish higher with no market-driving news. Looking ahead to tomorrow, the Initial Jobless Claims will hover around 430,000. The market will trade in a range as its breakaway from 1,228 is checked by lingering concerns about European economic strength and China's imminent tightening of monetary policy on Friday. The longer the market fails to break away from 1,228, the more violent the downward reaction will become.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/7/2010)

Analysis:

Today the market exhibited the classic pattern of a short-term top, as it opened higher and stayed elevated throughout the day, but only to close flat. Commodity markets do not bode well for the Bulls, either. Crude oil failed to break the key $90 resistance, while gold price action formed a double-top pattern. Euro's rally into $1.34 was apparently sold into by the Bears to finish above $1.32. Looking ahead to tomorrow, the driver of the market will be the failure of the European finance ministers to reach an agreement to comprehensively deal with Portuguese and Spanish debts. As a result, the sinking Euro along with the rising T-note rate will drag down the market to below 1,217.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/6/2010)

Analysis:

Friday's Analysis predicted that there will be "little room for further weakening of the dollar." Today the Euro weakened against the dollar, driving down the market to finish slightly lower. Looking ahead to tomorrow, the market will again focus on Europe's debt problems while there is no bullish news to propel the market higher. As a result, the market will drop below 1,217.

Strategy:

Hold short at 1,217

S&P 500 Index Analysis (12/3/2010)

Analysis:

Yesterday's Analysis predicted that "not all Bears have thrown in the towel, leaving an additional room for the market to rally." Today the market initially dropped after an extremely disappointing payroll increase for Nov., but once the market limited its loss, the Bears were squeezed before the weekend set in. Looking ahead to next week, little news will aid the Bulls, so the market will resume its focus on the European sovereign debts with possible downgrades of Greek and Portuguese debt ratings. China's Nov. inflation rate will stoke the fear of further monetary tightening. The Euro Bears, who last week outnumbered the Bulls (as measured by the number of net-short currency contracts) for the first time in recent months, have been squeezed out this week, leaving little room for further weakening of the dollar. As a result, the market will retrace towards 1,200.

Strategy:

Reversed to short at 1,217 for a profit of 20 points

S&P 500 Index Analysis (12/2/2010)

Analysis:

Yesterday's Analysis predicted that "the Initial Jobless Claims will confirm the continued downward trend in the four-week-average Initial Jobless Claims," and that "the market will rise above 1,210." Today the Initial Jobless Claims at 436,000 confirmed the downward trend, and the market rose above 1,210. On Nov. 26 the Analysis predicted that "the longer the market is held below 1,200, the bolder the Bears will become, and the longer they will refuse to admit to being wrong; thus, the more violent the eventual short-covering rally will become." The market's bullish run in the last two days has validated the prediction, although not all Bears have thrown in the towel, leaving an additional room for the market to rally.

Looking ahead to tomorrow, the payroll increase will be at least 155,000 while the unemployment rate will surprisingly drop to 9.5% or lower. The ISM Non-manufacturing Index will increase to at least 55.5. As a result, the market will rise towards 1,230 and settle below 1,228.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (12/1/2010)

Analysis:

Yesterday's Analysis predicted that "the market will recover the losses since Thanksgiving towards 1,200." Today the market recovered all losses since Thanksgiving to close above 1,200. Looking ahead to tomorrow, China's Q3 GDP will demonstrate that its restrictive monetary policy will not derail China's fast economic growth, and the ECB Governing Council will reassure the market on its commitment to an accommodating monetary policy for as long as necessary. The Initial Jobless Claims will confirm the continued downward trend in the four-week-average Initial Jobless Claims. As a result, the market will rise above 1,210.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/30/2010)

Analysis:

Yesterday's Analysis predicted that "both the Chicago PMI and the Consumer Confidence will boost the market." Today, they did not boost the market, but they at least stemmed the market's early loss. Looking ahead to tomorrow, the ISM Manufacturing Index will exceed the highest forecast at 57.2 to reach near 60, and the Motor Vehicle Sales for Nov. will rebound to pre-crisis level. As a result, the market will recover the losses since Thanksgiving towards 1,200.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/29/2010)

Analysis:

The market tests the patience of the Bulls, as it has failed to rise above 1,200. The market also frustrates the Bears, as it has repeatedly offered them intraday profits, only to pare the losses by the close. Today the market pared most of the day's loss to settle slightly lower. Looking ahead to tomorrow, both the Chicago PMI and the Consumer Confidence will boost the market, and the lack of negative news out of Europe will deprive the Bears of any additional ammunition.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/26/2010)

Analysis:

Today the market retreated in a low-volume trading. Looking ahead to next week, the revelation of the details of the Irish bailout on Sunday will soothe investor jittery, and an increase in consumer spending during Black Friday will add optimism for the economic recovery. Consumer Sentiment, ISM Manufacturing Index, and payroll increase will all boost the market. The seasonal Thanksgiving rally was delayed by the Korean skirmish, but the longer the market is held below 1,200, the bolder the Bears will become, and the longer they will refuse to admit to being wrong; thus, the more violent the eventual short-covering rally will become.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/24/2010)

Analysis:

Yesterday's Analysis predicted that "the Initial Jobless Claims will stay below 440,000 for a second consecutive week for the first time in many months," and that "the market will recover most of today's loss." Today the Initial Jobless Claims were 407,000, and the market recovered all yesterday's loss. Looking ahead to Friday, the tension in Korean Peninsula will not escalate, and the details of the Irish bailout will calm investor jittery. As a result, the market will break out 1,200 to rise as high as 1,210.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/23/2010)

Analysis:

Yesterday's Analysis predicted that "the revised Q3 GDP will be 2.4% or higher, as the international trade deficit subtracted less from the GDP due to a weak dollar." Today the revised GDP came in 2.5%. However, the Analysis did NOT predict the North Korean artillery shells landing on a South Korean island, and the market was pulled back by a variety of fear factors. Looking ahead to tomorrow, the Durable Good Orders excluding transportation will show that the US manufacturing sector continues to grow, and Personal Income also grows with improving employment. Finally, the Initial Jobless Claims will stay below 440,000 for a second consecutive week for the first time in many months. As a result, the market will recover most of today's loss while the Euro will have a short-covering rally.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/22/2010)

Analysis:

Over the weekend the Irish finally relented to ask for a bailout from the EU and the IMF. Today, the Bears tried to pull another buy-the-rumor-sell-the-fact trick, but the market had another idea and closed only slightly lower. Looking ahead to tomorrow, the revised Q3 GDP will be 2.4% or higher, as the international trade deficit subtracted less from the GDP due to a weak dollar, and the Fed's minute will disperse any lingering doubt about the Fed's resolve to carry out pumping the full $600 billion into the financial system by next June. As a result, the market, driven by technology stocks led by HP, will rise towards 1,210.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/19/2010)

Analysis:

Yesterday's Analysis predicted that "the market will rise." Today the market rose slightly on the backdrop of encouraging corporate earnings. Looking ahead to next week, the market will continue its upward movement, as the resolution of the Irish banking crisis and the revised Q3 GDP will provide the ground for the market to launch higher.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/18/2010)

Analysis:

Yesterday's Analysis predicted that "the Initial Jobless Claims will be below 440,000, which, along with improving Leading Indicators, will drive the market higher." Today the Initial Jobless Claims came in 439,000, and the Leading Indicators increased 0.5%. The market recovered most of its losses from earlier this week, perhaps validating the conspiracy theory that Wall Street institutions were out there to take profits from late retail bulls and bought at bargains just when the latter threw in the towel.

Looking ahead to tomorrow, the Irish rescue will become more concrete, and Chairman Bernanke's speech will firmly reject the exaggerated concerns about uncontrolled inflation fueled by the Fed's QE2 and will reaffirm the Fed's commitment to carrying out the injection of the full $600 billion into the monetary system by next June. As a result, the market will rise to as high as 1,210.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/17/2010)

Analysis:

Yesterday's Analysis predicted that "the CPI excluding food and energy will be flat or negative, drawing buyers into the bond markets and weakening the dollar." Today the core CPI was flat, and the dollar weakened. Looking ahead to tomorrow, the Initial Jobless Claims will be below 440,000, which, along with improving Leading Indicators, will drive the market higher.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/16/2010)

Analysis:

Today's market rout was all impressive in the sense that it fell through the 1,180-1,185 range and never bounced back. The market action would seem to support the notion that Wall Street institutions conspired to scalp (or shake out) retail investors just as the latter were convinced that the bull market was finally in place. Whatever the theory is, many late bulls no doubt threw in the towel, and the stock market aphorism "buy the rumor, sell the fact" belatedly -- by 13 days -- proves its inevitability like death and tax.

Looking ahead to tomorrow, the CPI excluding food and energy will be flat or negative, drawing buyers into the bond markets and weakening the dollar, and the Housing Starts will hover around the uninspiring 610,000 units. The market will rebound from today's sell-off as investors see values after the froth in the market has been cleaned up in the last few days.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/15/2010)

Analysis:

Friday's Analysis predicted that "retail sales will further boost investors' confidence." Today the October Retail Sales increased 1.2%, supporting the market for most of the day. However, the market erased the gains later due to the strengthening Euro and settled slightly lower. Looking ahead to tomorrow, the Industrial Production will be 0.5% or higher, and the Euro will bounce back higher after the solution to rescue two Irish banks is hammered out in Brussels. As a result, the market will rise as high as 1,210.

Strategy:

Hold long at 1,197

S&P 500 Index Analysis (11/12/2010)

Analysis:

Yesterday's Analysis predicted that "the Consumer Sentiment will not increase surprisingly, and that "the market will continue to drift lower to find a near-term support level." Today the Consumer Sentiment was 69.3, slightly higher than the consensus of 69.0, and the market found support near 1,195 before recovering near 1,200. Looking ahead to next week, now that the market has found its near-term support, it will drift higher as the concerns about Irish bondholders' "haircut" were dispersed by officials, and corporate earnings reports and retail sales will further boost investors' confidence in the market that is still priced below average in relation to earnings.

Strategy:

Bought at 1,197

S&P 500 Index Analysis (11/11/2010)

Analysis:

Yesterday's Analysis predicted that "the market will drop to find a support level upon Cisco's disappointing earnings guidance." Today the market dropped towards 1,200 before closing five points lower. Looking ahead to tomorrow, the Consumer Sentiment will not increase surprisingly. The market will continue to drift lower to find a near-term support level on the backdrop of the weakening Euro, and such a market retreat may provide a buying opportunity.

Strategy:

Long bias

S&P 500 Index Analysis (11/10/2010)

Analysis:

Yesterday's Analysis predicted that "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," and that "the market will attempt to retrace back below 1,200." Today the International Trade Deficit was smaller than consensus, and the Initial Jobless Claims were 435,000. The Euro initially dropped upon the news but bounced off support at 1.37. As the Euro recovered, so did the market come off a few points above 1,200 to settle higher. Looking ahead to tomorrow, the market will drop to find a support level upon Cisco's disappointing earnings guidance, and such a market retreat may provide a buying opportunity.

Strategy:

Stopped out at 1,205 for a profit of 8.5 points; currently with a long bias

S&P 500 Index Analysis (11/9/2010)

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

S&P 500 Index Analysis (11/8/2010)

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

S&P 500 Index Analysis (11/5/2010)

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

S&P 500 Index Analysis (11/4/2010)

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.

S&P 500 Index Analysis (11/3/2010)

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

S&P 500 Index Analysis (11/2/2010)

Analysis:

Yesterday's Analysis predicted that "the market will cautiously move higher, as the expected mid-term election results will weigh on the dollar." Today the dollar continued to depreciate against major currencies, and the market moved higher. Looking ahead to tomorrow, the Factory Orders will be healthy, and the ISM Non-manufacturing Index will bring a positive surprise. The weakness of the dollar below $1.40/Euro along with QE2 greater than $500 billion will seal the market above 1,200.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (11/1/2010)

Analysis:

Friday's Analysis predicted that "whether any upward move by the market will have any legs is somewhat doubtful, and such a market sentiment will result in a fading rally due to profit-taking." Today the market initially rallied on an upbeat ISM Manufacturing Index, but the rally soon faded due to profit-taking and dropped as many as 17 points before settling slightly higher. Looking ahead to tomorrow, the market will cautiously move higher, as the expected mid-term election results will weigh on the dollar. ADM's earnings report should lead material producers higher, as several agricultural products have hit multi-year highs, but the same factors will also negatively affect Kellogg's bottom lines.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/29/2010)

Analysis:

Today's Q3 GDP and Consumer Sentiment came in tepid and failed to lift the market, so the market finished flat. Looking ahead to next week, the ISM Manufacturing Index will confirm the ongoing economic recovery at a slow pace, and both a Republican-controlled Congress and the Fed's QE2 will provide support to the market, but whether any upward move by the market will have any legs is somewhat doubtful, and such a market sentiment will result in a fading rally due to profit-taking.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/28/2010)

Analysis:

Yesterday's Analysis predicted that "the Initial Jobless Claims will drop below 450,000." Today the Initial Jobless Claims came in 434,000, and the market rose slightly upon close. Looking ahead to tomorrow, the Q3 GDP will be at least 2.2%, as the international trade deficit was helped by a weak dollar and did not drag down the GDP as much. The Consumer Sentiment will increase slightly from September's 68.2 instead of the consensus decline. The Chicago PMI will decline less than the consensus and will not impede the market's rise. As a result, the market, aided by Microsoft's upbeat earnings report, will attempt to breach 1,200 and close above 1,190.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/27/2010)

Analysis:

Yesterday's Analysis predicted that "the Durable Goods Orders will bring a positive surprise, as the demand for manufacturing equipment from overseas remains robust, and the New Home Sales will rise from historic low to at least 305,000 units in light of concerns on titles of foreclosed homes." Today the Durable Good Orders rose 3.3%, and the New Home Sales rose to 307,000. The market finished slightly lower due to concerns about the size of the Fed's QE2. Looking ahead to tomorrow, the Initial Jobless Claims will drop below 450,000. As a result, an optimistic economic outlook will drive the market higher to close near 1,190.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/26/2010)

Analysis:

Yesterday's Analysis predicted that "the Case-Shiller Housing Price Index will rise only marginally, and Consumer Confidence will also rise above 50, albeit still at a depressed level." Today the Case-Shiller Housing Price Index rose 1.7% from a year ago, and the Consumer Confidence rose to 50.2. The market consolidated on the backdrop of a strong dollar, as the reality of future inflation in the US set in. Looking ahead to tomorrow, the Durable Goods Orders will bring a positive surprise, as the demand for manufacturing equipment from overseas remains robust, and the New Home Sales will rise from historic low to at least 305,000 units in light of concerns on titles of foreclosed homes. Conoco Phillips's earnings report will lead energy stocks higher. As a result, the market will make an attempt to 1,200 and close above 1,190.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/25/2010)

Analysis:

Friday's Analysis predicted that "the market will march higher." Today the market started off strong but pared the gains as concerns about the impact of home foreclosure irregularities on banks weighed the overall market, but the market still managed to top the recent resistance of 1,182-1,185. Looking ahead to tomorrow, the market will build on today's strong action that refused to dip below Friday's high. The Case-Shiller Housing Price Index will rise only marginally, and Consumer Confidence will also rise above 50, albeit still at a depressed level. Texas Instrument's upbeat earnings should provide support to technology stocks, and US Steels' earnings will contribute to a positive sentiment to materials stocks.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/22/2010)

Analysis:

Yesterday's Analysis predicted that "the market will trade in a range but drift higher." Today the market traded in a five-point range and ended higher. Looking ahead to next week, after consolidating in a tight range today the market will march higher, as additional upbeat corporate earnings are reported, and the expectations continue to build up for a Republican-controlled Congress and Fed's QE2.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/21/2010)

Analysis:

Yesterday's Analysis predicted that "the Initial Jobless Claims will be close to 450,000 and contribute to the market's optimistic sentiment." Today the Initial Jobless Claims came in as 453,000, and the market moved higher towards 1,190 upon opening. Technical related profit-taking caused the market to drop back below 1,185 despite upbeat corporate earnings, but the market still managed to finish higher. Looking ahead to tomorrow, the market will trade in a range but drift higher as American Express' upbeat earnings will pull financial stocks out of doldrums.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/20/2010)

Analysis:

Yesterday's Analysis predicted that today "Yahoo!'s upbeat earnings will help to send the market back above 1,170." Today the market rose on good corporate earnings and closed above 1,170. Looking ahead to tomorrow, China's Q3 GDP will lead the market to open higher, and the Initial Jobless Claims will be close to 450,000 and contribute to the market's optimistic sentiment. eBay's upbeat earnings will lead technology stocks higher, and Caterpillar's earnings will also bring a positive surprise given the rising commodity prices and will lead industrial stocks higher. As a result, the market will break away from the 1,182-1,185 resistance and close towards 1,190.

Strategy:

Hold long at 1,160

S&P 500 Index Analysis (10/19/2010)

Analysis:

Yesterday's Analysis predicted that today "Nasdaq-100 will lead the market retreat, and the S&P 500 index, whose recent rally has been led by technology companies, will need upbeat earnings reports from Bank of America to counter a significant retreat." Today the Nasdaq-100 did lead the market retreat. Although Bank of America's reported earnings far exceeded consensus, its performance was overshadowed by the fact that the New York Fed has joined the lawsuit to force Bank of America to take back certain mortgages sold to the New York Fed. As a result, the sentiment turned negative, and the market settled near the day's low. Looking ahead to tomorrow, the Fed Beige look will reiterate the gloomy employment outlook at all districts, which the market will take as another factor to prod the Fed into QE2 in Nov. Yahoo!'s upbeat earnings will help to send the market back above 1,170.

Strategy:

Reversed to long at 1,160 for a loss of 3 points

S&P 500 Index Analysis (10/18/2010)

Analysis:

Today the market rose past a disappointing Industrial Production in Sept., just as it did to a disappointing Consumer Sentiment on Friday. Looking ahead to tomorrow, the market is due to a retreat, as Apple's shares dropped 5% in after-hour trading from a record-high close despite impressive earnings far exceeding consensus, and IBM shares fared similarly. Nasdaq-100 will lead the market retreat, and the S&P 500 index, whose recent rally has been led by technology companies, will need upbeat earnings reports from Bank of America to counter a significant retreat.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/15/2010)

Analysis:

Yesterday's Analysis predicted that "the Consumer Sentiment will deteriorate instead of improve in light of continued dismissal of workers by government and businesses alike." Today the Consumer Sentiment did decrease instead of increasing as forecast by consensus. The market dropped on the news but recovered to close higher when Google's upbeat earnings more than offset GE's disappointing revenue. Looking ahead to next week, the market is due to a retreat, as the Fed's QE2 mantra starts to generate fatigue to investors who buy into the market on the expectation of the "Bernanke put" but are otherwise given too little concrete positive economic news.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/14/2010)

Analysis:

Yesterday's Analysis predicted that "the market will end lower" today, and the market did settle lower, although paring down the earlier losses. Looking ahead to tomorrow, Retail Sales will disappoint in the absence of large discounts offered to consumers in Sept. Empire State Manufacturing Survey will not recover as much as the consensus. The Consumer Sentiment will deteriorate instead of improve in light of continued dismissal of workers by government and businesses alike. As a result, the market will aim to plunge below 1,160.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/13/2010)

Analysis:

Yesterday's Analysis predicted that "the market will initially rise on the news of the upbeat earnings report from Intel, but whether the rise can be sustained depends on the market's perception of whether Intel's earnings growth is sustainable into next year." Today Intel did open higher but dropped throughout the day to close 2.7% lower. However, the broad market stayed elevated throughout the day and finished in an up note. The irony is that although Intel settled lower, the market rally was driven by technology stocks, as Intel's upbeat earnings report raised expectations of similar above-par performance of other technology companies. Today's Intel performance may shed light to the market performance tomorrow, as investors will consider the market "overbought" in light of the market's sharp rally recently. As a result, the market will end lower. A significant market retreat, if any, would provide an opportunity to get long.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/12/2010)

Analysis:

Yesterday's Analysis called the Fed's QE2 a "done deal," but the market did not fully price in such as "done deal." As a result, the market rose after the release of the Fed's minutes and closed higher. Looking ahead to tomorrow, the market will initially rise on the news of the upbeat earnings report from Intel, but whether the rise can be sustained depends on the market's perception of whether Intel's earnings growth is sustainable into next year.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/11/2010)

Analysis:

Friday's Analysis predicted that today "the market will consolidate while digesting the employment numbers." Today the market traded in a range and finished flat. Looking ahead to tomorrow, the market will again trade in a range with a downward movement, as the optimism of QE2 will give way to the concern that the Fed's initial asset purchase, while a "done deal," will be insufficient to support the market priced at this level.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/8/2010)

Analysis:

Yesterday's Analysis predicted that "the private payroll increase will disappoint because the consensus of 75,000 increase is a lofty expectation," and today the increase turned out to be 64,000. Upon the release of the news, the index futures dropped to as low as 1,148, but after opening the market spent the rest of the day climbing on the optimism that the Fed will conduct QE2 in Nov. Looking ahead to Monday, the market will consolidate while digesting the employment numbers.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/6/2010)

Analysis:

Today the better-than-forecast Initial Jobless Claims failed to lift the market, and the market made another attempt to drop below 1,150 in a day of consolidation. Looking ahead to tomorrow, the private payroll increase will disappoint because the consensus of 75,000 increase is a lofty expectation. Any number short of 75,000 will send the market back below 1,150, while a number below 50,000 will send the market to retest the 1,131 support. On the other hand, a number above 90,000 coupled with today's positive earnings report from Alcoa will pull the market decisively away from 1,150.

Strategy:

Hold short at 1,157

S&P 500 Index Analysis (10/6/2010)

Analysis:

Today the market's performance was disappointing to the Bulls, as it failed to build on yesterday's momentum but instead tried to drop back towards 1,150. The IMF lowered its forecasts for US growth this year and next, and the ADP survey cast doubt on the sanguine employment expectation of private payroll increase on Friday. Looking ahead to tomorrow, the Initial Jobless Claims will stay above 450,000, and the market will also take direction from Alcoa's earnings report as the first shot of the Q3 earnings season.

Strategy:

Got short at 1,157

S&P 500 Index Analysis (10/5/2010)

Analysis:

On Oct. 1, 2010 the Analysis predicted that "the market will attempt to stay below 1,131 before rallying from a point below 1,131 to soar above 1,150." Yesterday the market got a fraction of a point above 1,131 and today soared above 1,150 convincingly. This is a perfect example to illustrate the trading adage that "the last few ticks of profits are the most expensive ones to earn." The market soared because it found a bottom at 1,131 yesterday. Today the uncertain sentiment turned bullish to break the resistance at 1,150. Looking ahead to tomorrow, any market retreat towards 1,150 should provide an opportunity to get long.

Strategy:

Offset short at 1,156 for a loss of 34 points

S&P 500 Index Analysis (10/4/2010)

Analysis:

Friday's Analysis predicted that "the market will attempt to stay below 1,131 before rallying." Today the market did drop below 1,132 before bouncing off the support to settle lower. It is a matter of time before the market breaches the support and closes below 1,131. Neither the Factory Order nor the Pending Home Sales is positive enough to prevent a market retreat, as the Bulls resign to the fact that 1,150 is the market's near-term top. Looking ahead to tomorrow, the ISM non-manufacturing index will not deviate much from the already subdued consensus, and the market will be driven by events in Europe and US corporate earnings guidance.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (10/1/2010)

Analysis:

Yesterday's Analysis predicted that "a negatively surprising [ISM] reading tomorrow will further reinforce 1,150 as the near-term market top." Today the market opened higher to push towards 1,150, but the slightly disappointing ISM manufacturing index put a top to the market's advance at 1,150. Looking ahead to next week, no economic news is likely to be so upbeat as to catapult the market above 1,150, and given the market's expectation, any disappointing news will bring the market back to the summer trading range below 1,131. In all likelihood, the market will attempt to stay below 1,131 before rallying from a point below 1,131 to soar above 1,150.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/30/2010)

Analysis:

On Sept. 27 the Analysis predicted that "the market has found its short-term top at 1,150." Today all economic statistics came in better than the consensus, especially the Chicago PMI exceeding the consensus by a large margin. The market broke through the resistance at 1,150 to a high of 1,157, but once the Bears covered their short positions, the market dropped back below 1,150 and spent the remainder of the day in red. Moreover, nine out of the 10 S&P 500 sectors declined, signaling the breadth of the market retreat. The financial news quotes market pundit giving the reason as "the end of quarter rebalancing," but the real reason is that "the market has found its short-term top at 1,150." The Bulls should consider taking profits, not because being bullish is wrong, but because a reaction will give the Bulls an opportunity to get in at a lower price.

Looking ahead to tomorrow, the Consumer Spending will disappoint, and the core PCE index will be flat or negative, as retailers lured shoppers into buying with large discounts in Aug. The market mover will be a disappointing ISM manufacturing index. Just as a positively surprising ISM manufacturing index on Sept. 1 laid the foundation for the current "stealth rally," a negatively surprising reading tomorrow will further reinforce 1,150 as the near-term market top.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/29/2010)

Anaylsis:

Yesterday's Analysis predicted that today "will be a day of consolidation in the 1,131-1,150 range," and today the market did trade in a relatively narrow range. Looking ahead to tomorrow, barring a significant positive surprise of the final Q2 GDP, the Chicago PMI will be lower than the consensus and accelerate the selling of the market that already opens lower due to Moody's downgrade of Spanish bond rating overnight. As a result, the market will close below 1,131.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/28/2010)

Analysis:

Yesterday's Analysis predicted that "the Consumer Sentiment will be lower than the consensus," and today it came in much lower than the consensus. The market sold off on the news until it hit the support at 1,131 and then bounced to resistance at 1,150 before closing higher in a day largely dominated by technical trading. Looking ahead to tomorrow, it is doubtful that the PMI out of China will give the market a direction, so it will be a day of consolidation in the 1,131-1,150 range as the Bulls and the Bears take their respective positions for more economic news later this week, the Bulls betting on more corporate mergers while the Bears betting on uninspiring economic statistics.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/27/2010)

Analysis:

Today the fact that the market did not take out the 1,150 resistance is a surprise, given the backdrop of Unilever's acquisition of Alberto-Culver and Southwest's offer for AirTran, and to say that the failure of M&T Bank's merger with Santander outweighs the other two would be convincing to the gullible. Now the Bulls should consider taking profits, not because being bullish is wrong, but because the market has found its short-term top at 1,150 and will reach 1,120 before hitting 1,150. Looking ahead to tomorrow, the Case-Shiller Housing Price Index will bring a major disappointment that the Bulls may use to liquidate their long positions, and the Consumer Sentiment will be lower than the consensus, again dragged by the dim outlook for employment and dwindling household asset values including home prices, whose shrinking values will have been confirmed by the earlier Case-Shiller HPI, and stock holdings (because most retail investors did not catch the early part of the market rally since Sept. 1).

Strategy:

Hold short at 1,122 (Correction: The Strategy for Friday should have stated "hold short at 1,122 with a bias to exit short position" because otherwise it would have stated something along the line "offset short at 1,140 for a loss of 18 points." Mea culpa.)

S&P 500 Index Analysis (9/24/2010)

Analysis:

Yesterday's Analysis predicted that "unless the market can immediately reverse itself tomorrow to close above 1,131, the Bears will be emboldened and become very aggressive in attempts to push the market below 1,088." Today the Bears did not give the Bulls that opportunity to be emboldened, and the market recovered the previous three days' cumulative losses to close higher. This week has seen an epic battle between the Bulls and the Bears, the the Bulls had an upper hand. Looking ahead to next week, the market will find positive news to embrace and continue to rise.

Strategy:

Exit short position

S&P 500 Index Analysis (9/23/2010)

Analysis:

Yesterday's Analysis predicted that "the Initial Jobless Claims will stay above 450,000," and they came in as 465,000. The market opened lowered and bounced off the Leading Economic Index and Existing Home Sales. The former is an abstract number that is intangible, while the latter are the second lowest in history and look better only because the previous sales were the lowest in history. The market could not stay above 1,131 and fell within the trading range since mid-May. Unless the market can immediately reverse itself tomorrow to close above 1,131, the Bears will be enboldened and become very aggressive in attempts to push the market below 1,088 (hopefully not tomorrow). Looking ahead to tomorrow, AMD's lowering its corporate guidance may herald another round of disappointing corporate guidance before the earnings season, and a Durable Goods Order in line with consensus would only confirm the false breakout of the market early this week.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/22/2010)

Analysis:

Yesterday's Analysis predicted that "as the market continues to digest the Fed Announcement along with these data, it will sell off by the end of the day." Today the market did close lower, although one could argue that such a prediction always has a 50% chance of being correct. Nothing can be said about today's market action except that, truly, it is digesting the Fed's Announcement. Looking ahead to tomorrow, the Initial Jobless Claims will stay above 450,000, and the housing data will bounce off historic lows, although the extent of the rebound is uncertain.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/21/2010)

Analysis:

Today's Fed Announcement contains no surprise, and the market shot up briefly before settling lower. The Fed Announcement offers no sanguine picture of the economy but hints that the economy has veered towards the wrong track -- an inflation rate that is so low that the Fed may need to step in to pop it up, i.e., QE2. But since no Fed action is imminent, the Fed's assessment of the economy bears only bearish implication for the market. Looking ahead to tomorrow, the Initial Jobless Claims will stay above 450,000, and the housing data will bounce off historic lows. As the market continues to digest the Fed Announcement along with these data, it will sell off by the end of the day. In the next few days, the market will need either to close above 1,150 to confirm the resumption of a bullish trend or to close below 1,100 to scare off the retail investors who have jumped on the bandwagon in Sept. (Each time when bullish retail investors exceeded bearish retail investors by such a magnitude since 2006, the market has invariably declined.)

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/20/2010)

Analysis:

Friday's Analysis predicted that "the PIGS saga will continue out of Europe," and it did, as the spread of the Irish bond over the Bund surged to a record today. But Europe's financial woes were no concern to the market, at least today, as the market rose to a four-month high. No one can damp the market's bullish sentiment except the Fed. Tomorrow the Fed will lower its economic forecast for the remaining two quarters of this year and reiterate that the economic slowdown becomes more widespread than it had seen after the Aug. meeting. Upon the release of the Fed's statement, the market will sell off and close below 1,131. In the unlikely event that the market continues to rise to close above 1,150, that would spell the end of any lingering doubt about the resumption of a bullish trend targeting 1,200-1,220 by the year end.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/17/2010)

Analysis:

Yesterday's Analysis predicted that "the depressed home prices may continue to outweigh the improvement in employment outlook," and that "the CPI excluding food and energy will be flat or negative, as retailers lured shoppers into spending with large discounts." Today the Consumer Sentiment came in worse than the most pessimistic forecast, and the CPI excluding food and energy was flat in Aug.

Looking ahead to next week, the market will be fixated to the Fed's announcement on Tue., and the Fed will remind the market of the precarious economic condition with a language that is sterner than its Aug. announcement. But it is the Master itself that is also in a precarious situation because if it does not undertake QE2 (not your majesty's cruise ship) on Tue., it will be odd for it to act after the next meeting on the day after mid-term election. The PIGS saga will continue out of Europe and weigh on US financial stocks. Given the fact that the S&P 500 rally has been led by technology stocks, when the Nasdaq 100 takes a respite after rising for eight straight days, the S&P 500 may as well follow suit on Monday.

Strategy:

Hold short at 1,122

S&P 500 Index Analysis (9/16/2010)

Analysis:

Yesterday's Analysis predicted that "the Philadelphia Fed Survey will bring no positive surprise. This will give the market the reason to take profit and close lower." Today the Survey came in negative, and the market spent most of the day in the negative territory and closed a fraction of a point lower. Looking ahead to tomorrow, the Consumer Sentiment is difficult to predict because the depressed home prices may continue to outweigh the improvement in employment outlook. The CPI excluding food and energy will be flat or negative, as retailers lured shoppers into spending with large discounts. The concern on the economy will give the market that fails to break resistance a reason to drop to as low as 1,110.

Strategy:

Sold short at 1,122

S&P 500 Index Analysis (9/15/2010)

Analysis:

Today both the Empire State Survey and the Industrial Production came in line with consensus, and the market rode on its momentum to close higher. Looking ahead to tomorrow, the Initial Jobless Claims will surprise on the higher side to above 460,000, as they make up for the missed claims last week. The Philadelphia Fed Survey will bring no positive surprise. This will give the market the reason to take profit and close lower.

Strategy:

Sell short at 1,123

S&P 500 Index Analysis (9/14/2010)

Analysis:

Yesterday's Analysis predicted that "the market will continue its upward momentum to find and test a resistance in the absence of negative surprises in retail sales and business inventories." Today there were no negative surprises in retail sales and business inventories, and the market spent most the day higher before closing a fraction of a point lower. Looking ahead to tomorrow, the Empire State Manufacturing Survey will come in line with consensus or be better, and the Industrial Production will surprise on the upside by a significant margin. The market will open higher to test the resistance but fail to take it out.

Strategy:

Sell short at 1,125

S&P 500 Index Analysis (9/13/2010)

Analysis:

Friday's Analysis predicted that "the market clearly has turned bullish," and the market did, closing 12.35 points higher on the backdrop of robust growth in industrial production in China. Looking ahead to tomorrow, the market will continue its upward momentum to find and test a resistance in the absence of negative surprises in retail sales and business inventories.

Strategy:

Sell short at 1,124

S&P 500 Index Analysis (9/10/2010)

Analysis:

After much wrangling between the Bulls and Bears, the Bulls prevailed on the backdrop of a promising wholesale inventory report and proved yesterday's Analysis wrong. Looking ahead to next week, the market clearly has turned bullish, as it would focus on any positive economic news to rise regardless of the fundamentals. There will be an opportunity to get on the short side again as the market continues to rise. Next week's economic news will not be consistent in one direction, and a confluence of information offering diverging indications of the economic conditions makes the Analysis' prediction next week more challenging than before.

Strategy:

Offset short at 1,109.50 for a loss of 29.50

S&P 500 Index Analysis (9/9/2010)

Analysis:

Yesterday’s Analysis predicted that “the trade deficit will likely surprise on the narrower side,” and “the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000.” Today the trade deficit did come in lower than forecast, and the Initial Jobless Claims came out as 451,000.

Yesterday’s Analysis predicted that “the market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking.” Today after the open the market did rise to as high as 1,110 but could not hold above 1,105 and closed at 1,104, ostensibly due to the concern about Deutsche Bank’s capital sufficiency.

Looking ahead to tomorrow, to borrow the language of the Analysis of Aug. 31, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040,” the Bulls should feel tired, as the market stubbornly refused to follow any prodding to soar beyond 1,105. The market will find a reason to drop, and the reason most likely will come from Europe.

Strategy:

Hold short at 1,080 and stop loss if the market closes above 1,108

S&P 500 Index Analysis (9/8/2010)

Analysis:

Below are comparisons of the language in yesterday’s Analysis and in the Fed’s Beige Book:

Analysis: “Manufacturing activities continue to grow but at a decelerated pace.”
Beige Book: “Reports on manufacturing activity pointed to further expansion, although the pace of growth eased.”

Analysis: “The growth in retail sales will be limited.”
Beige Book: “Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases.”

Today the market dropped after the release of the Beige Book but ended the day higher. Looking ahead to tomorrow, the trade deficit will likely surprise on the narrower side due to the strength of the US dollar in July, and the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000. The market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking and send the market lower at close.

Strategy:
Hold short at 1,080

S&P 500 Index Analysis (9/7/2010)

Analysis:

Today the market decided that it was time to take the profit accumulated over the previous four trading days, and it found a reason -- the European debt concern, which has been there since May, so the market gave up all its gains driven by the Employment Report last Friday. Looking ahead to tomorrow, the Beige Book will look ocher and will be devoid of any sanguine look the Bulls would like to see. Manufacturing activities continue to grow but at a decelerated pace that are unlikely to pick up the steam before year end, while the slowdown in the service sectors will be more pronounced. The less somber news will be that the housing sector has stabilized, not because buyers are eager to own their new digs, but because housing activities cannot be slower compared to already historical lows; however, any pick-up in the housing sector is not in the offing, as the inventory is bloated with foreclosed and short-sold houses. Most importantly, the employment situation remains dire, as businesses are cautious in their outlook for the next six months. As a result, the growth in retail sales will be limited.

The market will be reminded of the precarious state of the economy under "unusual uncertainty." As a result, the market will drop after the release of the Beige Book at 2 p.m. and close below 1,084 to set the stage for some congested trading in the 1,060-1,080 range in the next few trading sessions.

Strategy:

Hold short at 1,080

S&P 500 Index Analysis (9/3/2010)

Analysis:

Yesterday's Analysis is proved exactly the opposite. The private payroll surprised on the upside, and the ISM non-manufacturing index surprised on the downside, "which did not save the [Bears] from the [cheering] private payroll number." Looking ahead to next week, the market will likely build on the current upward momentum, but given the magnitude of the rise in the last four trading days, it may well drop due to profit-taking.

Strategy:

Offset short at 1,083

S&P 500 Index Analysis (9/2/2010)

Analysis:

Today the Initial Jobless Claims came in as no surprise, as the Analysis predicted yesterday, but the Pending Home Sales Index was better than the consensus forecast, which gave the market the reason to rise.

Tomorrow is the Judgment Day -- to the Bulls, to be precise, and the Bears' trump card is the Employment Report. The Employment Report will likely surprise on the downside that will at least wipe out all today's gain if the private payroll increase is in the positive 20,000s, and there is some probability that the number may come in negative, which will set the tone for the Sept. market to plunge below 1,040. The ISM non-manufacturing index will likely surprise on the upside, but that will not save the Bulls from the disappointing private payroll number.

Strategy

Hold short at 1,080

S&P 500 Index Analysis (9/1/2010)

Anaylsis:

On August 30 the Analysis predicted “the market to recoup all today’s losses” the following day, which was yesterday. The market did not recoup all the losses yesterday, but did so convincingly today. On August 31 the Analysis predicted that “the PMI will likely surprise on the upside, which will prod the market higher,” and today the PMI did surprise on the upside and propelled the market higher after 10 a.m.

The market opened higher, ostensibly driven by the marginally higher manufacturing PMI reading out of China overnight, but the real reason is what the Analysis remarked yesterday, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040.” Once the manufacturing PMI was released at 10 a.m., the market released all the pent-up force against the Bears. Today’s rally clearly is a short-covering rally, because the market completely ignored any negative news, as the worse-than-forecast Construction Spending did no damage to the Bulls.

Looking ahead to tomorrow, the Jobless Claims will not be a surprise in either direction. Chairman Bernanke will use a speech opportunity to dispel any market doubt on the FOMC’s willingness to act in unity if another round of QE is needed, but he will also signal that no such action is imminent. His speech will drive the market to open higher until the Pending Home Sales Index one hour later reminds the Bulls of the economic reality in contrast to today’s euphoria. The market will test the resistance in the 1,080-1,084 area but should close lower when Friday’s judgment-day mentality sets in.

Strategy:

Long stopped out at 1,075; sold at 1,080

S&P 500 Index Analysis (8/31/2010)

Analysis:

The market initially did what yesterday's analysis predicted. As the Consumer Confidence Index did not slip below 50, and the Chicago PMI was marginally better than consensus forecast, the market did take off after 10 a.m. But the market's rise was checked when the FOMC meeting minute was released at 2 p.m. and finished the day flat. After the last seven trading days the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040. Looking ahead to tomorrow, the PMI will likely surprise on the upside, which will prod the market higher, but any rise will be checked and partially offset by the Construction Spending release.

Strategy:

Hold long to reverse at 1,080

S&P 500 Index Analysis (8/30/2010)

Analysis:

True to previous day's analysis, the market built on Friday's gain to top 1,072 overnight before fading prior to the market open today. The conventional wisdom is that the market sold out on the news of a meager personal spending in July, but the sell-out seems to have been overdone, especially in light of the continuing wave of mergers which the market largely ignored today. Looking ahead tomorrow, barring the scenario of a dip of Consumer Confidence Index below 50, the Chicago PMI will likely surprise on the upside around 59, which will provide much needed confidence booster for the market to recoup all today's losses.

Strategy:

Hold long to reverse at 1,082

S&P 500 Index Analysis (8/27/2010)

Analysis:

Today the S&P initially acted strangely, and it is most puzzling when it
dropped sharply after 10 a.m., perhaps having to do with Intel's ill-timed
announcement at 9:58 a.m. The better than expected downwardly revised Q2 GDP
to 1.6% provided a sound backdrop for the Bulls to start with, and Chairman
Bernanke's comments at 10 a.m. gave assurance to the much battered Bulls, so
the market never looked back after a brief swoon at 10 a.m. Now that the
market has bottomed out from the 1,040 area, it will continue to build on the
upward momentum on Monday.

Strategy:

Hold a long position with a limit order to reverse at 1,082