Saturday, 3 March 2012

Weekend Report- Part'1: Bullish outlook

This weekend I've decided to separate things into 3 main postings

Part 1: Bullish outlook
Part 2: Bearish outlook
Part 3: Overview of where we might be.

Okay, lets start with Part 1', the 'Bullish outlook'.

First, I wish to note that I remain fundamentally bearish in the longer term. There are simply too many huge ticking economic time-bombs that will detonate at some point. Whether its the money printing madness policy of the various central banks, systemic unemployment of the western economies, or simple resource problems (Oil, metals, agricultural land). There are so many massive issues, most of which remain largely being glazed over by the mainstream media.

However, what IS clear is that the infamous 'can', can be kicked down the road for some considerable time. Whether this can-kicking can be kept going for another year, 3 years, or even longer...lets set that question aside for now, but acknowledge that it is a very valid possibility the bears need to keep in mind.

Russell 2000 small cap – a good index to follow

I would argue that most indexes broadly track the same, so I'll generally stick to just one. I will note also that the Transports (the historic 'leader') has indeed lead lately, lower. The Rus'2000 is the second leader in my view, and is much more volatile than anything else right now.

So, lets look at the R2K. I will focus – and use charts, via the ETF equivalent of IWM, since that’s what I trade, via options, and for other traders via TZA/TNA.

Near term, it looks like a retracement is underway. This coming week we seem likely to break the secondary - and more steep trend line, and then break lower to around the 76/74 level. Bulls will only need to be concerned if we see IWM in the 72s or lower. There is a LOT of strong support at many different levels.

The IWM weekly:

This count assumes that last May was NOT the start of the much touted P3 wave of destruction. Indeed, the fact that both Dow, SP, and Nasdaq indexes all broke the summer 2011 highs, would strongly suggest this 'final wave 5 UP' theory is correct. The most bullish outlook right now would maybe call for IWM hitting triple digits. Lets note that if we do pull back to around 75, such a move would mean the subsequent up cycle being a huge gain of 35% within just 6-9 months.

The SP' monthly - bullish short term, with doomster outlook mid term.

This outlook suggest a test of the all time index-high around 1550 sometime between early summer and late Autumn. 

VIX - near term Bullish market across the summer

Another tease?

Are the bears about to see a cruel tease? The VIX does look set for some kind of surge upwards, but 24/26 may be as far as it gets. If so, then VIX will quite likely make new lows across the summer in the 13s..maybe even single digits -if the main indexes make an attempt to make new historic highs.

Can you imagine the hysteria of clown channel hosts touting '...isn't it great, VIX is under ten for the first time in many years, with the market set to break all time highs, EVERYTHING is fixed!'. Yeah, that sickening news item I can well imagine has already been scripted by some producer, just in case.

So, that's my brief summary on where we might be from the more bullish perspective.

Stay tuned for more!
Part'2 (arguably the more exciting outlook) will be posted soon :)