A fantastic January for stock markets! probably the best in decades.
US stock prices doesn’t really indicate any Euro Crisis whatsoever. There are hardly any signs of recessions or double dip (remember those were so loud and clear till Nov’11). Doesn’t Mr Market discounts everything 6months in advance? Since S&P500 touched 1074.77 in early Oct’11, it has rallied almost 20%!! That’s excellent performance by any measure and hardly any indication of economic headwind.
Now what’s next- It’s time to choose; markets are going to fly, pause or pull back?
Let’s look at the chart below. It’s a weekly chart that covers 2007/08 meltdown and subsequent rally. The pullback of 2011 was a Classic chart patterns followed by classic reaction! The pattern is up again and then there are additional confluence zone around these price levels. What is the next reaction going to be? will it be the same? upside target of 1376 target was a calculated one, and so was 1329 (~1333). Everything that you see on this chart is calculated one.
This is one of those decisive moments where markets may experience sharp move. S&P500 can breakout to new range, or pull back sharply. From a trader’s perspective, neither being a directional trader will be easy nor being non-directional. One will have to take some degree of risk to benefit from this. Even if you don’t want to take any chances, trade carefully.
If you were to ask my take; my side will be “Bears” and my subsequent projections will be 1255-1266 area. There is no point in contemplating how severe further pullback will be. We’ll revisit this after few weeks.
Profitable Trading, OP