A DIFFERENT LOOK

THE TRENDS: Since officially the first quarter of the year ended with this Friday's trading I thought it would be interesting to give you a look at a very important chart that I look at when analyzing the long term trends. The image you see below is a quarterly chart of the SPY. Each bar represents 3 months of trading activity and the last bar you see is the trading activity that took place between 1/1/2012 and 3/31/2012. As you can see the last two quarterly bars have been very bullish so the long term up trend remains very much intact.



As you can see the chart spans from 1998 to the present. The main advantage of using a chart like this is that it is easy to get confused by the daily and even weekly fluctuations in price. But when you pull up a monthly or quarterly chart the long term trends become clear. The other major advantage is that long term support and resistance levels become clear. I've pointed out the importance of two such levels on the chart. The bull market which began in 2003 ended at nearly the same level as the previous bull market in 2000 and the bear market which ended in early 2009 ended just below the level of the previous bear market in 2003.

SUGGESTION FOR 401-K: As I pointed out last week, even though the bull market is strong, if you have been out of the market entirely up until now, it is a little risky to throw in 100%. My feeling is that over the next several weeks we will at least get a normal market correction to a support level. If and when that happens we then look for a sign of strength that another up leg will take place. This will offer a lower risk opportunity to participate if there is more up side left.

Have a great weekend!