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.
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