(On normal market days, I publish everything first–usually by three days or so–on my subscription newsletter Jubak Asset Management (Jubakam.com). But on days when the market moves big–up or down–or when there’s some breaking news that all my readers need to know, I’ll publish my take simultaneously on both sites. That’s the case, I think, today.)
Finally.
After toying with investors last week, the Standard & Poor’s closed above 1140—at 1142.71–today, September 20.
That takes the index above the top of the trading range for the last four months. Stocks have now set a higher low in August and a higher high in September.
That’s important not because it’s a signal that in the short-term stocks are going to rally like it’s March 2009.
A move like this is significant because of what it tells us about where we’ve been since the market put in its 2010 high back on April 23 at 1217.
The fear since then as stocks dragged lower, setting lower highs at each stage of that move, into August was that the rally that began in March was over and that stocks were headed into a new bear market. That would have been a huge disappointment. A rally after a huge bear market that lasts just a little more thn a year is extremely short by historical standards.
A new high in September, though, argues that rather than being the beginning of a new bear, the moves since April make up a consolidation of the March 2009 rally in preparation for a new stage that continues the March 2009 rally from this new foundation.
The most likely course from here isn’t some pedal to the metal rally. Most consolidations don’t work like that. It takes more than one move to a new high to build a foundation for the next sustained move to the upside.
The most likely next move for stocks will be for them to fall back after setting the new high today. They could well stretch higher—much will depend on the spate of housing data that arrives tomorrow, Wednesday, and Thursday. If the numbers surprise to the upside, it’s likely that momentum will take us higher in the short term.
But I’d be very surprised if stocks stage an assault on the April 23 high of 1217 without pulling back to build a new foundation.
If I’m right about what this break above 1140 means, then that pullback would be to a higher low. And then stocks would be ready to take another shot at a higher high somewhere over today’s 1140.
OK — so what we have is what Abagail Dolittle says is a inverse head and shoulders …. she has been very very cautious regarding this chart call but it pretty much follows JJ’s assessment. IHS charts from 13 times in the past suggest we are going to 1217, or more.
Next increase off of the 1140 high is to the 1217 resistance, or to 1250 … should be interesting … how do you feel about that JJ. Thanks for you input as usual.
OMG, dl is a cost average/buy and hold guy. Talk about strategies that don’t work.
I understand the post, I manage my money and I do very well. I also take into account who writes stuff and why. This post is pure speculation, but that’s what sells. A big part of the system is based on everybody trading like crazy, brokers make money, writers make money and that works as long as nobody remembers that timing the market is not possible.
This technical event was meaningless since the accompanying volume was extremely low.
Go have a look at a SP500 chart in March 2009. Back then, volume to the upside was twice as much as what we’ve had these past weeks.
This rally has no substance, it’s a fake-out than a break-out. Might last for a while, who knows? But for now I’m betting on more downside.
I suppose everyone from economists to talking heads and (a-hum) the small investor has their precious cutsie-pie opinion about what the market will do. I don’t think the market knows yet (the point of the article…technicals noted)! If anyone did know, they’d have all gains and no losses on positions held (or have a good idea when to “time” the market)! Give the guy a break or go write your own column.
dlezama,
such a unfortunate post.
It is very clear what Jim is saying: Wait for a pull back and increase your stocks allocation…by following the markets you will be able to point a reasonable entry point.
Please also remeber that Jim, as everyone else has no cristal ball to know where markets are headed.
Anyway, the final message is that, reasonably!?… the risks to invest in this market have reduced since yesterday….(not gone away..)
Bye
What is up with DGW. On the watch list and down 70%. I have wanted to buy this company for years. How low can it go????
Is it a no or a go?
Hmm. . . dlezama, guess I’ll go first but you might be able to READ, but you don’t really COMPREHEND. I will not paraphrase Jim (I thought he was pretty clear) but I will say if you don’t understand what he said then you’d be better off having someone manage your money and spend more time with your family or on your hobbies. (insert smiley face)
sleazema, think you’re missing the point
Sounds like for short-term traders, the momentum is to the upside.
Jim- In the medium term of Oct-Nov, do you still foresee a significant correction of 10-15%?
Ow, I forgot the smiley, it sounds really rude without it 🙂
However, I do think this is a speculative shot, with padding to avoid being wrong in both directions. Is it necessary to publish something when the market moves? Does it necessarely mean that something happened?
So, what you’re saying is that stocks could go up or down, what a genius.