Friday, February 22, 2008

Preliminary Week-End Equity Market Comment - 2/22/2008

If you will recall a post about 2 weeks ago that discussed a pattern of Investor Sentiment and the results of this pattern occuring.

For those who do not remember, the pattern has been 100% over a 10 year time frame and has returned 24% from the lows to the end of the move.
A move of this size will bring us right back to the highs on the S&P 500 at 1570-1580.

Here is more confirmation of this pattern, as the prediction model is looking for sharply higher prices over the next 2 1/2 months.

The blue bars represent the current market action and the black bars are the benchmark model.
As you can see, the black bars make quite an impressive run over the next 60 days and to top it all off, the model is calling for a 24% return from low to high just like the sentiment pattern did.

I wanted to post some preliminary comments on the equity action today as this weekend may be a very busy one and I simply may not have the time to publish a full week-end comment.

The market today staged a very impressive late day rally and once again saved itself from breaking the wedge based on closing prices. This continues to be a strong positive, especially with most market pundits expecting this pattern to break to the downside.

I think the main reason you saw such a sharp reversal was their short covering as the market moved a but higher. Many of the shorts put their positions in place early in anticipation of some sharp downside follow through on a break of the wedge and when this did not materialize and the market began to stabilize and push a bit higher there was a mini buying panic as more and more shorts got covered.

The good news about getting today out of the way is that we are now out of the seasonal weakness pattern and breaking into a strong seasonal upside pattern. This pattern officially goes into effect on Tuesday and runs all the way through March 16 or perhaps even stringing out all the way to March 20th. The nature of the potential rally will dictate its life cycle so we will address that once we have enough data under our belts.

For Monday we have a Neutral to Very Slightly Bearish Tendancies for the day.
The Models Outcome is as Follows:

Bullish - 3 components
Bearish - 3 components
Neutral - 2 components

This translates into a coin toss either way, but should not be a big increase or decrease when the close finally occurs. Expect the volatility to continue though as there are simply to many positions out there that need to be squared.

As I said, I am going to try and post more of a week-end comment later in the week-end, but in the event I do not manage to squeeze it in, then this will have to do.

I hope you all had a very profitable week in the markets as there were some great opportunities presented to us and the good news is that looking forward, new opportunities should flourish.

No comments:

Trend Analysis LLC Headline Animator