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