ALMOST THERE

LONG TERM TREND: Remember last week I stated that in order for the long term up trend to re-assert itself, that it must close AND hold above the 40 week moving average? As you all probably know by now last week was a very strong up week and it closed slightly above this important average (see attached chart). But now the question is, will the professionals and institutions who really drive the market sell at this important juncture or buy to drive the market higher?



SUGGESTION FOR 401-K: I'll be watching the daily charts each day next week to see evidence of what the professionals are doing. If I see strong evidence of buying as the market tests this average I will get back in and will update the blog. So watch your emails. Have a great weekend everyone.

NOT TEMPTED YET

LONG TERM TREND: Last week the SPY rose for the 3rd consecutive week. But as I pointed out last week we are getting close to a very important resistance area. The marked closed at 123.97 this week and price is now very close to the 125 area and the 40 week moving average at 127.55. If the long term trend is going to reassert itself it MUST close and hold above this area on a weekly closing basis. Until then, the probabilities favor that this may simply be a bullish correction in a longer term bear market.



SUGGESTION FOR 401-K: I'm not back in yet due to reasons stated above. Have a great weekend.

SITTING PAT

LONG TERM TREND: Despite the strong week we had this week, not enough has changed to convince me that the long term trend is back up. The most important elements of a possible shift down in the long term tend are still there. Take a look at the chart below. You will notice two charts. The one on the left is a snapshot of the last bear market we had from late 2007 to March 2009. The one on the right in the current market. The first thing you should note is the 40 week moving average that I've drawn on both charts. The second thing you should notice is how similar the patterns in both markets are. In early 2008 the market dropped below this moving average, formed a double bottom and then rallied only to stop right at the now down sloping moving average. From there the market proceeded to drop over 50%. The EXACT same pattern is setting up right now.



SUGGESTION FOR 401-K: Right now we are in "no mans land". The 40 period weekly average is essentially the same as the 200 day moving average or the 12 month moving average. All of these are watched closely by institutions and professional traders and as you have seen can provide powerful support and resistance levels.

Have a great weekend and let me know if you have any questions.

PSYCHOTIC

LONG TERM TREND: As I mentioned last week the market has many of the earmarks of a long term bear market but not all. Take a look at the attached weekly chart of the SPY and let me explain. As you can see this past week was a strong week so the 110 level (our important lower "line in the sand") held. If the market is to confirm a long term bear market this level needs to be broken on a weekly closing basis. For the market to prove it is shifting back into a bull market, it MUST close above the 120-122 level (upper "line in the sand") on a weekly closing basis. So technically what we have here is a market that is range bound (between 110 - 122 with a bearish bias.



SUGGESTION FOR 401-K: Until the 122 level is broken I'm not interested in committing any long term money to the market. Have a great weekend everyone.

UGLY

LONG TERM TREND: Ugly can be the only word to describe the events of the last four months. MANY of the earmarks of a major bear market are now in place. Take a look at the attached monthly chart of the SPY. There are three things I want to point out:



1) For the last four months prices have dropped and have now closed below the mid line of the price channel. The last time the market did something similar was in January, 2008 when the market fell three months and closed below the channel.

2) Notice how heavy the volume was in the months during those declines.

3) The ONLY thing preventing this market right now from the 13 month decline after January 2008 is the 100 level on the SPY. This is not only an important psychological number but is also the level where the last major decline stopped...In July 2010. If this level is broken, there is a high probability that the decline will continue to test the lows made at the end of the last major bear market in March, 2009.

SUGGESTION FOR 401-K: Obviously this is not a good time to be in the market. In my view the only thing that will convince me that there is a possibility of another leg up is if the market can stay above the 100 level and have a weekly close above the 120 level. I'll keep watching. Have a blessed week.