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