Double top for stocks or double trouble?
Stock Index Report
by Carley Garner
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2010-03-05
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March 5th, 2010
According to Warren Buffet, risk comes from not knowing what you are doing. Unfortunately, I have had a front row seat to the carnage that can occur in misguided speculation. Before you put your hard earned money on the line, join me on March 18th for a behind the scenes look at what really impacts a commodity trader's bottom line and to discuss topics from "A Trader's First Book on Commodities" : http://www.nyif.com/courses/crcn_1104.html
Double top for stocks or double trouble?
The drawback of writing a newsletter with relatively strong opinions in market direction is the substantial risk of being wrong...or in this case just early (we think). Unfortunately, our crystal ball was a bit cloudy earlier this week. We were right about the rally, but didn't anticipate it moving quite this far.
Our 1125 objective in the S&P has come and gone and while we still feel like the market will see a reversal sooner rather than later, we cannot overlook the possibility of a retest of the January highs. This would put the S&P just under 1150...or even moderately higher. The Russell on the other hand, has already surpassed its recent highs and is now trading in territory not seen since late 2008.
There are very valid arguments for the bear camp that are being overlooked (or over run) by this rally, but sometimes fundamentals simply don't matter. The market is panicked...shorts are panicking and being squeezed out and the last of the sidelined cash is panicking to get in.
The employment numbers weren't positive, but their implications were. They jobs picture is bad enough to prevent Fed rate hikes but it isn't bad enough for investors to recall the possibility of a double dip recession. Nonetheless, some analysts are vocalizing the opposite. "Eight months into the much-touted recovery, the economy should be adding jobs not just losing jobs at a slower pace," noted Peter Morici, an economist for the University of Maryland.
There is some resistance in the S&P near 1138 but 1148 seems very possible target before a reversal can occur. The NASDAQ is facing resistance near 1900, and in the Russell this equates to about 669.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into
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| Meet the Author |
Carley Garner
Senior Analyst and Broker; Stocks and Commodities Magazine columnist; Author of "A Trader's First Book on Commodities" and “Commodity Options” published by FT Press a division of Prentice Hall.
Stock Index Report has contributed 291 issues.
See More about Carley Garner
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