Looking for Decisive Moves in the Markets
By Wayne Burritt
June 5, 2009
Just as I’ve said, the broader U.S. equities market continues to power higher. Let’s begin with this weekly chart of the S&P 500 (a good proxy for the broader U.S. stock market):
As you can see, stocks are on a roll. In fact, from a low of 667 in March to a recent price of 944, U.S. stocks are up a mind-blowing 41%.
That’s a ton of upside action in a relatively short amount of time. And while I anticipate the typical 3-5% pullbacks along the way, there’s little doubt this market is headed higher in a strong and decisive way.
In fact, while I’ve told you here many times that I was confident this market was going to head higher, I’m impressed by how solid and steady that uptrend has really turned out to be.
But that’s not all…
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The market has powered above the 930 resistance level — set during the beginning of last month — like a walk in the park. That level should now become a solid support level for more movement to the upside.
But here’s where it gets tricky: If you take a long, hard look at a daily chart of the S&P 500, you’ll quickly realize that the near-term 930 level actually balloons to include a range extending all the way to 944. And since that level was established on a medium-term high in January, we’re really looking at resistance in the 930-944 range.
In other words, for the market’s recent action to really get legs, I’m looking for a decisive move above 944, not 930. And since we just pierced 944 this week and have yet to establish support, don’t be surprised if we get some lower prices in the days and weeks ahead.
Now, if you listen to the pundits and talking heads, you’ll probably hear that the move in the broader markets that I’ve been predicting and talking about for months doesn’t have any fundamental power behind it: It’s all just smoke and mirrors.
I love it when I hear stuff like this.
In fact, using many of the so-called experts in the investment field as contrary indicators — in other words, buying when they say sell and selling when they say buy — has put cash in my subscribers’ pockets time and time again.
You can mark my words: When everyone says it’s time to get into this market for good, you can bet your bottom dollar the market’s big moves will be history. It’s just a fact of life that you can’t wait for the herd; you have to take reasonable chances, and you have to have vision of what’s going to happen, not what’s already in the hopper right now.
And while there’s no doubt the broader fundamentals aren’t rosy, they’re certainly on the mend. And the biggest one — recovery in the real estate sector — is beginning to show more life:
- Existing home sales in April jumped an impressive 2.9%, to an annual rate of 4.7 million units. Plus, distressed properties — read: foreclosures — continue to be cleared from the market, a big key for price stabilization down the road
- Interest rates are at record lows, home prices are super-attractive and first-time homebuyers can enjoy an $8,000 tax break. In my book, those are all positives.
And it’s not just real estate fundamentals that are on the mend. I’m also seeing upticks in industrial production, consumer spending and consumer confidence.
Best wishes,
Wayne Burritt
P.S.: Here’s the bottom line: The markets continue to power higher, supported by strong technical factors and improving fundamentals. And right now, I have just the way to play it…
