Friday 12 July 2013

Disturbingly bullish market

The market is now at day'13 of a rally that has seen the sp' ramp 115pts, from 1560 to 1675. With Bernanke assuring the market that QE is set to continue, the bulls are back in total control. It would appear the indexes will continue to push strongly higher into August.


sp'weekly9 - near term bullish outlook



sp'monthly - the ABC x ABC x ABC


Summary

The past 13 days have been a real trial for the bears, not least including yours truly. I certainly expected a rally (I even went long at sp'1564), but I had been expecting a deeper low to follow..and it never came.

The sp'1687 high looks set to be broken either tomorrow or early next week, and the sp'1700s are a given, right? Is there anyone left that still thinks the sp'500 won't be trading in the 1700s this month..or next?


RE: the two charts

Weekly'9 -  assuming 1687 was a peak of sub'3...we just saw the 4 down..and now we're in the last wave higher..that will max out sometime in August..although I am trying to keep in mind that it might drag out into September.

The second chart - monthly'6e, is more of an academic interest that anything. Certainly, its no good for short term trading.

I believe at some point we are going to see a major wave lower - in the style of summer 2011, but really, that might not be until late spring 2014 - at which point we could be trading as high as sp'2000/2200. Then, a 15/20% pull back, would only drag the market back down to the 1800/1700s..before the next 12-18mth up cycle.
  
As regular readers will know, I have a major interest in the work of Martin Armstrong. If his ECM cycle is 'broadly' reflected in the US equity/commodity markets, with a high in late 2015/early 2016, then we will probably be looking at sp'2500..perhaps even 3000.

At that point, average index P/E ratios would be in the 35/40s, which would indeed be a giant bubble, one that would go explode..just as bad as 2000/2008..if not worse.


Issues still out there

I still think there are some 'serious issues' out there that the market is currently completely ignoring. Not least in Germany, where Merkel (I believe) will get the boot in September elections.

The problem remains for the bears, so long as QE continues, the underlying price pressure will remain to the upside...despite any periodic 'scares' - like Cyprus. Anyone still remember the Cyprus banking implosion?


Looking ahead

There are two pieces of econ-data to be mindful of tomorrow...producer prices and consumer sentiment. I don't expect either to be 'bad' as such, so the market really shouldn't have any excuse to get even mildly upset ahead of the weekend.

*there is no significant QE until next Friday (opex, July'19).
--

*Having bailed on index-shorts early Thursday, I am now long Oil (via USO). For me, its been a difficult two weeks, but I will battle on..and I will win what is..the ultimate financial war.

Goodnight from London