S&P 500 - Tentatively Bullish

Last Sunday I posted that the market had confirmed an intermediate bullish shift in sentiment.  Therefore, the price movement on Wednesday & Thursday last week were exactly what we were looking for as entry points.  However, the price move was so dramatic that it reduced the slope of the intermediate signal line indicating that sentiment is tentatively bullish.  If the intermediate signal line (blue) peaks before crossing zero it will indicate that we will likely see new lows, but for now the slope remains positive.  As described in my August 19, 2011, since the long term sentiment remains negative and the slope of the 200 day simple moving average is not clearly positive it is still risky to make market entries, but the higher risk may lead to higher returns.  Therefore, a cost averaging strategy that accounts for the higher risk should be employed.

Note:  I have added the chart below to its own page (see tab at top) to be updated daily. 

9/26/2011 S&P 500 (click on chart to enlarge).

S&P 500 - Bullish Shift In Sentiment + New Signal Developed

Last week the intermediate sentiment signal (the blue signal line in Chart 1 below) is close to crossing above a 1/3 rise from its minimum (pink line).  This indicates that we are entering an intermediate buy period which will last until the intermediate signal line climbs to 2/3 above its minimum.  However, the long term sentiment remains bearish and the slope of the 200 day simple moving average (200 SMA) is beginning to turn negative which is another long term bearish signal.  But a new signal that I have developed (see chart 2 below) indicates that it is not likely that we are to experience a 2001 or 2008 market crash scenario.  Therefore, this may be a good time to begin incremental purchases of an S&P 500 Index Fund or similar.

Chart 1

Chart 2: New Signal